Loading Victoria’s unemployment rate is at 4.6 per cent and employment growth has powered ahead every year since 2013-14, the most sustained period of expansion since the 1980s, the budget papers say. But wages growth remains stubbornly subdued, hitting just 2.3 per cent last financial year, which is equal to the rate of inflation. The department said in its analysis that there are several explanations for why wages growth may be low at a time of low unemployment. “For example, much of the recent reduction in spare capacity has come about through additional hours worked by existing workers and from additional workers previously outside the labour force, with both growth in hours worked and the participation rate in Victoria currently at elevated levels,” it said.

“This additional supply is likely to have placed some downward pressure on wages.” The trend of low unemployment mixed with subdued wage growth is not unique to Victoria, but mirrored by other economies including NSW, Britain and the US. This, Treasury speculates, could be driven by a number of trends in the workforce, including changes in the nature of workplace bargaining, an increase in part-time work and greater efficiency driven by technological change. “This would mean the economy can sustain a lower rate of unemployment without inducing inflationary pressure,” Treasury said.

But there is optimism of an increase in wages in the coming years. The budget papers forecast an increase in wages growth this financial year to 2.75 per cent, rising to 3 per cent in 2019-20 and to 3.5 per cent by 2021-22. Loading Replay Replay video Play video Play video Jobs figures in the budget reiterated how crucial the Andrews government’s infrastructure pipeline is to the state’s economy. One in 10 jobs in Victoria are in the construction industry, the Andrews government said on Monday.

A total of 115,000 people are employed on the government’s major projects. "It means that everywhere you look, there's evidence of growth and progress," Treasurer Tim Pallas said. "There are cranes in the sky, engineering graduates and apprentices on the ground and massive machines digging deep into the earth." Government infrastructure investment is forecast to average $13.6 billion a year over the budget and forward estimates, nearly triple the average of $4.9 billion a year from 2005-06 to 2014-15.

But the analysis warns that rising employment could bring with it a new problem: a skills shortage. “The past few years have seen large and sustained falls in unemployment rates across a range of advanced economies, including in Victoria and Australia,” the budget papers say. “This suggests these economies may be approaching capacity constraints and businesses may find it more difficult to find suitably skilled employees.” There is already evidence that many people in the Victorian workforce are working longer hours. The Age revealed this month that key white-collar workers in the Victorian infrastructure sector are under increasing mental strain from excess overtime and deadline pressure.

The survey of 683 private-sector professionals working on Victorian government major projects found that half work more than 50 hours a week, and a further 17 per cent work more than 60 hours a week on average. It also found the constant pressure to work long hours was harming those workers’ mental and physical health.