Pay packets are growing at the fastest rate in more than a decade as the strong labour market continues to put upwards pressure on wages.

Wages are increasing by about three per cent annually, notably higher than the 2.3 per cent average growth in the past decade.

But sky-high inflation is eroding these gains, with wages contracting at a rapid rate when accounting for the rising cost of living.

Treasurer Jim Chalmers said real wage growth is anticipated next year as inflation moderates and wage growth remains robust.

“The wages growth that we’re seeing in the economy is something that we hope we can sustain and obviously inflation will moderate over time,” he told ABC News on Tuesday.

“So to the extent we can do something meaningful on both sides of the equation, we’ll get the real wages growth in our economy.”

However, he said real wage growth relied on unpredictable inflation forecasts.

New Treasury analysis of Australian Bureau of Statistics data also found wages for the lowest skilled occupations grew 2.3 per cent in the three months to September but just 1.2 per cent for the most skilled workers.

The industrial umpire’s decision to lift the minimum wage boosted wages in this category for the September quarter.

More than 400,000 Australian workers got a boost to their pay slips after the Fair Work Commission’s decision, with affected full-time workers pocketing an extra $40 a week.

While some have raised concerns about higher wages putting upwards pressure on inflation, Chalmers said wages were not to blame for the inflation crisis.

“We have an inflation problem because of a war in Ukraine, pressure on global supply chains and other challenges ignored for too long,” he said.

The December quarter wage price index will be released on February 22.

Meanwhile, consumer sentiment lifted in January according to the latest index from Westpac and the Melbourne Institute.

The index gained five per cent to 84.3 points in January, from 80.3 points in December.

While it was the largest monthly rise in the index since April 2021, Westpac chief economist Bill Evans said this might be because there was no central bank interest rate rise this month.

The Reserve Bank of Australia board doesn’t meet in January but will be back around the table on the first Tuesday in February.

Westpac expects the board to continue with its interest rate policy tightening at its next meeting on February 7.

More broadly, Evans said consumer sentiment was still depressingly low despite the apparent improvement in January.

“The January read is in the bottom 10 per cent of observations since the mid-1970s,” he said.

The ANZ-Roy Morgan weekly consumer confidence index released on Tuesday also pointed to subdued sentiment.

The index was up 0.3 percentage points to 87.7 points for the week ended January 15, driven by gains in Victoria and Western Australia. Confidence dipped in NSW, Queensland and South Australia.

– AAP