Treasurer Joe Hockey has warned that a 50 cent-and-hour increase in the minimum wage could hit the job prospects of millions of Australians.
In a sign of the Government's concerns about the Fair Work Commission's decision this week to give the lowest paid an $18.70 a week pay rise, Mr Hockey said there was "no doubt" of a negative effect on jobs from higher wages.
The commission backed its increase by arguing there was growing inequality between those on the minimum wage and those able to bargain for their pay.
It also noted the lowest paid were finding it more difficult to cover their living costs.
The decision has prompted complaints from business groups, which largely backed an increase of about $8 a week.
Mr Hockey said Australia, at $640.90 a week, had the second highest minimum wage in US-dollar terms in the developed world.
Though the direct increase would affect only about 2 per cent of the workforce, he said it would ripple through to other parts of the workforce, including those earning up to $150,000 a year.
Mr Hockey declined to criticise the decision directly but made clear his concerns about its impact on the jobs market.
"Those increases in wages do have an impact on job creation," he said.
Unemployment is at 5.8 per cent, with more than 100,000 jobs created in recent months.
Business groups are demanding changes to penalty rates, arguing they are making it too expensive for some firms to open on Sundays or late at night.
Mr Hockey would not be drawn directly on whether he backed the end to penalty rates but stressed there was an economic consequence from them.
Figures this week showed real unit labour costs falling across the country through the first three months of the year, with wages now growing slower than inflation.
The Australian Bureau of Statistics reported yesterday that work days lost to industrial action fell to a seven-year low in the March quarter. In WA, just 100 days were lost to industrial action. Nationally, 9700 were lost. 'Those increases in wages do have an impact on job creation.'" Treasurer Joe Hockey