Australia's employers led by an industry group and the retailers association have warned of the possible consequences of the minimum wage increase approved by authorities.

Australia Industry Group said in an emailed statement that the decision by Fair Work Australia to increase minimum wages by 3.4 percent will be similar to a punishment for big employing sectors still reeling from the value of a high dollar, rising energy prices and facing the prospect of further interest rate increases.

Employers said the pressures of the higher cost of living will compromise the cost of living of minimum wage earners, but it would also put them at risk of losing their jobs.

Ai Group's Chief Executive Heather Ridout said on Friday: "We understand the pressures on the cost of living for the low paid, but this decision is on the high side and it exposes lower-skilled people to a greater risk of unemployment or underemployment. Therefore, it does carry risks."

She said the industry business groups are also contending with the high cost of superannuation, workers' compensation and payroll tax are added. The decision translates to an increase of $19.40 per week for the National Minimum Wage, $22.60 at the base trade level and $37.70 at the professional level.

The Australian Retailers Association has slammed the decision, saying it disregarded tough trading conditions.

"This decision is disastrous for retailers," the association's executive director Russell Zimmerman said in a report by the Sydney Morning Herald.

"It's unreasonable to expect them to pay increased wage bills while the sector struggles to post any significant growth."

The business groups said that in the current circumstances faced by non-mining, trade-exposed sectors such as manufacturing and tourism, the decision is sure to further erode margins and will weigh against decisions over retentions and new hiring