SYDNEY, Mar. 25 (Reuters) - Australia's government will support a minimum wage increase in line with inflation this year as low-income families continue to grapple with costs of living, although the rise would be smaller as inflation eased.

In a submission to the Fair Work Commission's 2023-24 Annual Wage Review to be unveiled on Thursday, the Labor government will recommend the increase to ensure "the real wages of the low-paid workers do not go backwards", a position the government has held in the last two years.

"Certainly the expectation is that the minimum wage will be lifted. What we're trying to ensure is that people on the lowest pay in our economy and in our country don't go backwards," Treasurer Jim Chalmers said in an TV interview on Monday.

"This is all about ensuring that people can earn more... And that's because we recognise that these cost-of-living pressures do fall disproportionately on the lowest paid in our workplaces."

Last July, the FWC hiked the minimum wage by 5.75% as costs of living surged, a decision some had feared would further stoke inflation. However, there has been no sign of a damaging wage-price spiral and inflation has slowed to two-year lows of 3.4% from a peak of 8.4%.

The Reserve Bank of Australia sees inflation edging down to 3.3% by June 2024.

The Labor government has also pledged more costs of living relief in the upcoming budget in May. It will deliver tax cuts for every taxpayer from July this year.