Australian pay packets are a bit fatter, but not by much.

The key measure of wage growth, the Wage Price Index, grew by 0.6 per cent over the third quarter.

On a seasonally adjusted, year-on-year basis, wages rose 2.3 per cent.

That is an increase on the downwardly revised 2 per cent in the second quarter.

The result was also propped up to an extent by the 3.5 per cent increase in the minimum wage, which kicked in from July 1 this year.

“There was a higher rate of wage growth recorded across the majority of industries in comparison to this time last year, reflecting the influence of improved labour market conditions,” Australian Bureau of Statistics chief economist Bruce Hockman said.

“Annual wage growth at the Australia level was 2.3 per cent, the highest growth rate since September quarter 2015.”

Once again public sector wage growth outpaced the private sector, with the gap widening further.

In the 12 months to September, public sector wages grew by 2.5 per cent compared to 2.1 per cent in the private sector.

Tasmania recorded the strongest growth rate, up 2.6 per cent over the year, while the end of the mining construction boom is still weighing on wages in Western Australia, which rose just 1.6 per cent.

Not surprisingly, mining industry wages still exhibiting the weakest growth (+1.7 per cent year-on-year). Education and health care workers have seen their pay rise by almost 3 per cent.

While wages are growing faster than consumer prices, the gap is narrow.

Taking inflation into account, real wages have risen just 0.4 per cent over the year, continuing to put pressure on household spending capacity.

AMP chief economist Shane Oliver said the good news is that wages growth has continued to lift from its 2016 low point of 1.9 per year-on-year.

“Were it not for the acceleration in minimum wage increases, wages growth would still be running at around 2 per cent, so there is still little evidence of significant pick up in underlying wages growth,” he said.

Job market still slack

Callam Pickering, Asia-Pacific economist with the global job site Indeed, said wage growth is slowly drifting in the right direction, yet overall wage conditions remain disappointing, particularly across the private sector.

Mr Pickering said private sector wage has consistently lagged behind public sector wage gains for the past five years.

“Wage growth has been helped recently by tighter labour market conditions and a hike in the minimum wage,” he said.

Mr Pickering said wage growth is unlikely while conditions in the jobs market remain “slack”.

“The underutilisation rate [the combination of the jobless rate and workers looking for more hours], which is highly correlated to wage growth, remains above 13 per cent.

“It is unlikely that wage growth will exceed 3 per cent until the underutilisation rate tumbles below 11 per cent.”

-ABC