The minimum wage will increase to $17.70 per hour from the current rate of $16.50 next April, in a significant boost to New Zealand's low-paid workers.
It comes after last April's 75c increase.
The $1.20 rise is significant compared to previous years, where it generally rose between 25 to 50 cents.
Workplace Relations Minister Iain Lees-Galloway said the April 1 increase to $17.70 per hour "will benefit approximately 209,200 workers and their families, lifting wages throughout the economy by $231 million per year and making a big difference for families".
"About a quarter of those earning the min wage… are parents, with children."
Training wages are also set to rise from $13.20 to $14.16 "in order to stay at 80 per cent of the adult minimum wage".
"With the labour market tight and unemployment at the lowest since 2008 at 3.9 per cent, now is the right time to lift the wages of our lowest paid New Zealanders," Mr Lees-Galloway said.
However, National say while it supports consistent rises in the minimum wage, the $1.20 hike is "steep, and so is the extra $231 million a year in costs it will impose on New Zealand businesses".
"While the announcement is good news for workers on the lowest pay rates for others it will mean their jobs are in jeopardy as businesses will struggle to absorb the new costs," said MP Scott Simpson.
ACT's David Seymour said that increasing the minimum wage by "such a big hike, and at such short notice, will dump massive new costs on small businesses, meaning they will be less able to take on new staff".
"Thousands of jobs that would have been created will no longer come into existence," Mr Seymour said.
The minimum wage is set to rise to $20 per hour by 2021 as part of the Labour and New Zealand First coalition agreement.
Currently, the 'living wage' is said to be $20.55 per hour, seen as the income necessary to provide workers and their families with the basic necessities of life.