Pay increase for lowest-earning Australians will stop wages slipping backwards

From July 1, the national minimum hourly rate will be $24.10, up from $23.23 this financial year. The hike equates to an extra $33.10 each week.

Over 2.5 million workers - roughly one in five - nation-wide will see the increase in their bank accounts.

The change comes after a recommendation to the Fair Work Commission from the federal government to boost minimum pay rates so the wages of Australia's lowest-paid workers did not go backwards in real terms.

Treasury secretary Steven Kennedy on Monday said the increase was "perfectly reasonable" to stop workers losing out.

But questions remain as to whether the wage wise will cause inflation to spike again.

For the third year in a row, the government called for pay rates to be increased.

Treasurer Jim Chalmers said wages growth was part of the solution to the rising-cost-of-living, not part of the problem.

"We've gone in to bat for Australian workers, recommending the Commission ensure real wages for low-paid workers don't go backwards," Dr Chalmers said last week.

"Since coming to government, we've made welcome progress in the fight against inflation and seen a return to real wages growth, but we know it's not mission accomplished because many Australians are still under pressure.

"Peter Dutton wants Australians to work longer for less but we take a different approach.

"Our economic plan is all about helping Australians earn more and keep more of what they earn which is why our Budget focused on the fight against inflation, tax cuts for every taxpayer and supporting wages growth."

Last year, the commission increased awards by 5.25 per cent. Workers on the minimum wage got a $1.85 per hour pay rise to an hourly rate of $23.23 per hour.

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This year the Australian Council of Trade Unions called for a 5 per cent increase, while the Australian Chamber for Commerce and Industry advocated for a 2 per cent rise and the Australian Industry Group called for a 2.8 per cent increase.

The government's submission said wages shouldn't automatically rise in line with inflation, but the commission should ensure "the real wages of Australia's low-paid workers do not go backwards."

Any increase to minimum pay rates would come into force on July 1.

The minimum rates of pay and award rates have flow-on effects for other workers as industrial agreements cannot be lower than the award rate for that industry.