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Jul 5, 2:33 AM EDT

Australia raises minimum wage 2 percent effective Oct. 1


SYDNEY, Australia (AP) -- Australia's 1.2 million minimum wage workers were given a 2 percent pay increase Thursday by the government's Fair Pay Commission, the second pay increase in 10 months.

The commission raised the weekly federal minimum wage 10.26 Australian dollars (US$8.79; €6.45) to 522.12 Australian dollars (US$447.49; €328.60) effective Oct. 1, the commission said in a statement.

Hourly wages were boosted A$0.27 to A$13.74 from A$13.47 an hour. The new increase will apply to workers on pay scales up to A$700 a week.

Economists said the hikes, which fell well short of the A$28 per week demanded by unions, was too small to ignite inflation and put additional upward pressure on interest rates.

"These are very low numbers... It does mean that there is no extra impetus for higher wages in the economy from this decision," said Rob Henderson, senior economist at nabCapital.

"Therefore it is likely it will not feed into higher inflation and therefore higher interest rates," Henderson added.

Business groups had lobbied for a rise of A$10 per week. Unions had argued that rising costs of gasoline, healthcare and education warranted a more significant rise in the base wage.