Treasury secretary John Fraser believes wages growth is at a turning point after years of slim pickings for workers due to the "scars" left by the global financial crisis.
A department survey last year found the scars of the 2008-2009 crisis were "far rawer and deeper" than imagined and bosses were being very careful about investment spending.
"Similarly on wages, people were being scared to add to the cost of their production because they were just worried we hadn't really come out of the GFC," Mr Fraser said.
Now, however, he now thinks wages growth is at a turning point to improvement.
He noted a pick-up in the construction sector in Victoria, parts of Sydney, and in Brisbane.
Mr Fraser also remains confident about Treasury's forecast for annual wages growth of 3.5 per cent by 2020/21, compared with 2.1 per cent now.
While Treasury has in the past been accused of being too optimistic in its forecasts, Mr Fraser defended its recent record saying its prediction of the turning point in the world economy was "ahead of the pack".
