The national minimum wage has increased in Australia by 5.2%, in line with inflation, according to an announcement on Wednesday by the country’s independent wage-setting body.

As from 1st July, Australia’s lowest earners will receive A$21.38 per hour, compared to the current rate of A$20.33, as affirmed by the Fair Work Commission, impacting over 2 million workers, Reuters reports.

“The low-paid are particularly vulnerable in the context of rising inflation,” according to Justice Iain Ross, Fair Work Commission president, noting a “sharp rise” in living costs and a possible rise in inflation.

With Australia’s unemployment currently sitting at 3.9%, close to a 50-year low, Ross said the move “will not have a significant adverse effect on the performance and competitiveness of the national economy.”

Earlier this month, Prime Minister Anthony Albanese sought to make sure real wages didn’t go back, Business Times reports. Within its election campaign, Australia’s new centre-left Labour government supported a 5.1% hike in the minimum wage.

On Tuesday, central bank governor Philip Lowe said consumer price inflation would now likely hit 7% by the end of 2022, from the current rate.

Trade unionists stated they were “really happy”, saying the decision was “reasonable and fair” whilst businesses cautioned the wage increase would further strain operations and represented a “significant risk to economy.”

Unions were hoping for a 5.5% wage rise, whilst businesses suggested an increase within the range of 2.5% to 3%.

The Australian Chamber of Commerce and Industry (ACCI) stated the move would increase expenses for businesses by around A$8 billion over this year, which are already struggling with higher input costs and a tightening labour market.

“(The wage hike) veers very much towards the upper end of the range of possible outcomes that we could have expected,” said ACCI chief executive Andrew McKellar.