Any prospective increase to the minimum wage should take into consideration the fact that Australians are set to benefit to the tune of $550 a year once the carbon tax is abolished, the federal government says.

And with an economy struggling to find its feet after a resources boom, any increase that comes at the cost of jobs should be approached with caution, the government has submitted to the Fair Work Commission’s (FWC) annual wage review.

Unions and business groups are at loggerheads over the FWC’s review, with the ACTU calling for a minimum rise of $27 a week for Australia’s lowest paid workers and employers arguing for $8.50.

The national minimum wage is $622 per week.

ACTU secretary Dave Oliver said the growing gap between minimum wages and actual wages and raised concerns Australia was heading down the same path as the US with its established class of working poor.

But in its submission to the commission, the federal government said Australia’s transition from a resources-driven economy to non-resources-led one meant it was not growing as fast as forecast.

At a time when global markets were strengthening, any increases that put jobs at risk should be approached with caution, the government said.

“Any wage increases that are not supported by improvements in productivity and that are beyond the affordability of businesses will not be sustainable and will cut jobs,” the submission said.

“The panel’s decision should support jobs growth.”

The submission said being employed, even at a low wage, was better for families and individuals than being unemployed.

“Minimum wage increases are an inefficient and ineffective tool for increasing the living standards of low paid workers,” it said.

Employment Minister Eric Abetz said the government was concerned about easing the burden on low income earners but that would largely come from scrapping the carbon tax.