Australia's lowest-paid workers will be guaranteed a "living wage" under a federal Labor government but business groups warn the plan will put jobs at risk.
Labor leader Bill Shorten said the living wage policy would directly benefit about 1.2 million Australians if his party wins the next election.
Under the first stage of the plan, the Fair Work Commission would take advice from businesses, unions and the community to determine what a living wage should be.
It would also consider Australia's social wage - the amount of tax people pay, and any family tax benefits or other transfers they receive.
"A living wage should make sure people earn enough to make ends meet, and be informed by what it costs to live in Australia today - to pay for housing, for food, for utilities, to pay for a basic phone and data plan," Mr Shorten said on Tuesday.
While Mr Shorten did not nominate a living wage figure, the ACTU says it should be 60 per cent of the median Australian wage, which equates to $756 a week.
Australia's current minimum wage of $18.93 an hour, or $719.20 per 38-hour week, is the highest in the world in terms of spending power, according to the World Economic Forum.
Under the coalition government, the minimum wage has gone up each year at a faster rate than inflation and wage growth across the economy.
Labor's plan will have the Fair Work Commission look at when the increase should be phased in, taking into account the capacity of businesses to pay, and the potential impact on employment, inflation and the broader economy.
"This is not a new and radical process. It's just an overdue process," Mr Shorten said.
The Australian Industry Group said the plan creates risks for low-skilled people, part-time employees and young people, who could lose the jobs if wages rise too fast.
The Australian Chamber of Commerce and Industry said the policy would force many businesses to choose between cutting employees' hours or laying them off.
But Mr Shorten said they were being pessimistic.
"The evidence is that lifting the wage actually will help stimulate economic growth," he said.
Labor's living wage would not automatically flow through to award wages, but rather only apply to those receiving the national minimum wage.
There would still be an annual wage review to determine award wages.
Jobs Minister Kelly O'Dwyer said Labor wanted to make "dramatic changes" to the rules.
"These, by the way, are the rules that were set up by Bill Shorten and the Labor Party when they were last in government," she told reporters in Brisbane.
ACTU secretary Sally McManus welcomed the announcement as a first step in addressing "broken wage rules".
"The re-establishment of a living wage would ensure that full-time work means a comfortable life and enough money to live on, not simply to avoid starvation," she said.
