Wage growth has hit a new record low, dipping below 2 per cent.

Pay rises for workers across all industries are barely in line with the rising cost of living.

The Bureau of Statistics Wage Price Index went up by 0.4 per cent in the September quarter, seasonally adjusted, rising just 1.9 per cent over the past year.

Public sector employees saw a 2.3 per cent pay increase, compared to 1.9 per cent for the private sector.

“Through the year wage growth is now below 2.5 per cent for all industries,” the ABS observed.

“In the September quarter 2016 wage growth ranged from 1 per cent for mining to 2.4 per cent for health care and social assistance.”

Inflation has been at 1.3 per cent for the year to September, which is considerably less than many economists forecast.

“Notably, ‘WPI including bonuses’ also slumped more sharply than ‘excluding bonuses’, to a record low of just 1.7 per cent year-on-year (down from 2 per cent in the second quarter and 2.5 per cent in the first quarter)," analysts from investment bank UBS pointed out.

TD Securities strategist Annette Beacher said rising underemployment is creating weak wage outcomes.

“The RBA has been examining the role of lower average hours worked for some time and, while this flexibility has provided a cushion for employment during global downturns, it now appears to be contributing to lower wage growth than expected,” she told reporters.

The Reserve Bank and Bureau of Statistics produced a special report explaining the weak wage increases.

It outlined two ways for employers to keep pay rates in check - delaying pay rises or giving smaller ones.

The ABS said both methods were being used.

“The average length of time between wage changes has risen from once every four quarters in 2012 to once every four-and-three-quarter quarters in 2016,” the ABS noted.

“This fall in the average frequency could reflect more wage freezes or longer delays in renegotiating wage contracts.

“The average size of wage changes (conditional on a wage change) has fallen from 3.6 per cent in 2012 to 2.3 per cent in 2016 and is now well below its 2000s average.”

The government analysts say the reduced pay rises are responsible for over two-thirds of the overall slowdown in wage growth.

The ABS noted there has been a steep decline in the proportion of large wage increases.

Annual pay rises of over 4 per cent accounted for the biggest share of pay moves before the GFC, but wage increases of 2-3 per cent per annum are now more common, with rises of 0-2 per cent coming in second place.

“In addition to the declining share of wage changes that are larger than 4 per cent, the average size of those increases has fallen from 7.5 per cent in 2012 to 5.75 per cent in 2016, which has weighed on aggregate wage growth,” the report noted.

“The declining share of ‘large’ rises has been apparent across all industries, though the shift has been largest in mining and the industries exposed to mining, such as construction and professional, scientific and technical services.”