The Turnbull government has hailed a 3.5 per cent rise in the minimum wage as a "carefully considered and balanced outcome", as Labor urged greater relief for workers.
The Fair Work Commission decision on Friday will lift base wages from $18.29 an hour or $694.90 per 38-hour week to $18.93 an hour or $719.20 per week.
The commission also increased minimum wages for up to 2.3 million workers, who have their pay set by any of the 122 modern awards, by 3.5 per cent.
The rise is understood to put Australia slightly ahead of Luxembourg in terms of the world's highest minimum wage.
Workplace Minister Craig Laundy said the decision was evidence the government's economic settings were correct and job growth polices are working.
Labor frontbencher Brendan O'Connor said the rise was necessary to make sure Australians got to share in good economic conditions.
"We needed to see some redress to flatlining wages and people struggling with cost-of-living pressures," Mr O'Connor told reporters in Adelaide.
"This goes some way to responding to that. But ... we need to see better tax relief for working-class and middle-class families and we call on the government to support Labor's tax relief."
Australian Chamber of Commerce and Industry employment director Jenny Lambert said having a safety net was important.
"But we need to get the balance right, because we've got to make sure we protect the most vulnerable small businesses," she told reporters in Canberra.
Ms Lambert said businesses would cut hours or decide not to grow as a result of the minimum wage rise.
Greens MP Adam Bandt said one-in-four people in poverty are working full-time.
"Even though the economy is apparently strong, this decision will still leave many full-time workers living in poverty," he said.
"Until we enshrine in law a minimum wage above poverty level, inequality will continue to grow in Australia."
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