The Treasury says Australia may enjoy a wages boom, but it does not know when. 

The top government economists expect lower unemployment levels to finally trigger a wages boom, which would be welcome news after a decade of stagnant wage growth.

Treasury secretary Steven Kennedy this week told a senate estimates session that quickly driving wages up, pushing unemployment down, and containing inflation at sustainable levels would “reward younger generations” for bearing much of the economic cost of the COVID-19 pandemic.

The federal government wants to push unemployment below 4 per cent this year, but even as its drive continues, wages have not kept pace.

Dr Kennedy says the Treasury expected wage growth to have begun its rise already.

“We probably underestimated the extent to which we could draw people into work, and not put any pressure on wages,” he said this week.

But he insisted that driving unemployment down would push wages up.

“Australia has not been this close to this opportunity since 2008 and, before that, prior to the shocks of the 1970s,” he said.

“While nothing is assured, let us hope that we can seize this opportunity in the period ahead and reward younger generations for the significant impost they have taken on through the budget and protecting all Australians from the impacts of COVID.”