Wages growth revised down in budget update

Treasurer Josh Frydenberg is upbeat about future wages despite a budget update that shows lower than expected growth.

The outlook for wages growth has been revised down in the federal budget update. (AAP)

Wages growth has been revised down in the latest federal budget update, despite a strong jobs market.

The mid-year economic and fiscal outlook released on Monday pointed to an annual wage price index of 2.5 per cent, down from 2.75 per cent in the May budget.

As well, the 3.25 per cent figure set out in the budget for 2019/20 has been revised down to three per cent.

However, Treasurer Josh Frydenberg was upbeat about growth.

"Year-ended wage growth is expected to rise from 2.5 per cent in 2018/19 to three per cent in 2019/20," he told reporters in Canberra.

As well, growth in the wage price index picked up to 2.3 per cent through the year to the September quarter, its strongest outcome in three years, he noted.

"Anecdotal evidence from Treasury's business liaison program points to skills shortages and wage pressures in some sectors of the economy, consistent with a tightening labour market," he said.

Mr Frydenberg said other advanced economies were seeing a similar effect, with the response of wages to improving labour market conditions slower and more muted than in past cycles.

"The United States, Canada and New Zealand have also experienced subdued wage growth in an environment of low unemployment and solid GDP growth," the budget update papers said.