Workers will see their pay packets grow in real terms for at least the next five years, flying in the face of ingrained inflation fears, the federal government predicts.
Continuing strength in the Australian labour market is expected to result in a four per cent rise in wages growth in the 2023/24 financial year, outstripping inflation by half a percentage point.
After almost three years of workers seeing their wages effectively going backwards, Tuesday's federal budget forecast real wages growth would persist until at least 2028.
Although wages growth is predicted to fall from 2024/25, it will remain above inflation, which is expected to return to the Reserve Bank's two-three per cent target range by the end of June 2025.
Treasury is confident the consistently strong labour market will not result in a wage-price spiral, despite the central bank flagging the persistence of wage-sensitive services inflation as a key source of uncertainty in its latest monetary policy statement.
The unemployment rate is forecast to tick up to four per cent by the end of June, a quarter of a percentage point lower than was forecast in the previous year's budget.
It is expected to peak at a historically low 4.5 per cent before beginning to fall back down in four years' time, well short of the pre-COVID rate of 5.2 per cent.
The government will aim to further boost workplace participation by trialling programs to support employers to provide job opportunities to long-term unemployed jobseekers and helping businesses provide paid job placements for people with high barriers to employment.
"We want an employment system that works to genuinely connect people to jobs, and that employers want to use to meet their workforce needs," Employment Minister Tony Burke said on Tuesday.
A significant contributor to wages growth was the 15 per cent increase to aged care workers' pay, supported by the federal government.
An extra $65.6 million over the next four years will be spent to attract and retain workers, as the government tries to make good on its promise for round-the-clock staffing for aged care residents.
Wage increases have also been provisioned for child care workers.
A further $98.4 billion in funding to increase supports for children with additional needs is hoped to further increase the participation of women in the workforce.
Despite recent strides, less than 63 per cent of women participate in the workforce, compared to more than seven in 10 men.
