Wages are growing at their fastest pace on record but workers are still going backwards because pay gains are being outstripped by inflation. The wage price index jumped 1.3 per cent in the September quarter, the biggest increase in the measure's 26-year history, pushing annual wages growth up to 4 per cent. The rise was driven by the combined effect of a 5.75 per cent minimum wage increase handed down by the Fair Work Commission, higher pay for aged care workers, the negotiation of new enterprise agreements and the removal of wage caps for state government workers, said Australian Bureau of Statistics head of price statistics Michelle Marquardt. The ABS official said pay gains were secured by workers under a variety of employment arrangements including award and enterprise agreements and those on individual contracts. Those in the private sector secured the biggest average annual wage boost, 4.2 per cent, while public employees gained an average 3.5 per cent. "Many public sector jobs were affected by the ending of state wage caps and the resolution of wage negotiations. This resulted in initial or backdated increases being paid for jobs covered by the newly approved enterprise agreements," Ms Marquardt said. But pay negotiations between the federal government and Commonwealth public servants remain deadlocked. Although real wages are going backwards in annual terms, Treasurer Jim Chalmers and Employment Minister Tony Burke said in a statement that they actually increased by 0.1 per cent in the September quarter and were expected to return to annual growth early next year. Dr Chalmers and Mr Burke said workers deserved higher wages and "that's what we're delivering". "We believe that solid, sustainable wages growth is part of the solution to the cost-of-living challenges Australians face, not part of the problem," the ministers said. But the Australian Council of Trade Unions said more needed to be done to lift real wages. ACTU secretary Sally McManus said workers were "bearing the brunt" of the cost-of-living crisis, with inflation driving a $1350 real wage cut in the past 12 months for someone on average full-time pay. Ms McManus said major companies were posting record profits through price gouging, adding to the nation's inflation problem. She urged parliament to pass the government's Closing Loopholes legislation, which aims to criminalise wage theft, set minimum standards for gig workers and enable casual jobs to be converted to permanent positions. Independent ACT senator David Pocock and Tasmanian senator Jacqui Lambie succeeded in forcing the bill to be split, with debate on the bulk of proposed measures put off to a later date, probably not before 2024. Shadow treasurer Angus Taylor said the wages figures confirmed "what Australian households already knew. Which is that their living standards going backwards fast". Mr Taylor said it was real age growth, not nominal gains, that mattered to families and accused the treasurer of failing to tackle inflation. "What I want to see is higher real wages; that is the only thing that counts. It's what wages can buy that counts," he said. But Dr Chalmers told Parliament that annual real wages had fallen by 3.4 per cent under the Coalition and the rate of decline had now slowed to 1.4 per cent, showing that the government was "closing the gap". The biggest wage gains were in the hospitality and food services sector, where they grew by 3.2 per cent in the September quarter, in part as a result of the Fair Work Commission's annual wage review. Some hospitality jobs received two award increases in a year. READ MORE: The outcome of the wage review also helped drive a big 3.1 per cent quarterly pay boost for health and social assistance workers, while aged care staff also benefited from the outcome of the Aged Care Work Value case. Workers in mining, finance and insurance secured the smallest increases. While the overall jump in pay is large, real wages are still shrinking because of the speed of inflation and the rate of increase is not expected to concern the central bank as long as productivity improves. EY chief economist Cherelle Murphy the strong lift in wages was "not out of line with the Reserve Bank's expectations". Ms Murphy said the real test would arise in coming months when the central bank would look for evidence that easing labour demand was supporting a slowdown in wages. "[This] result alone will not convince the Reserve Bank that another rate hike is needed," she said, but warned that risks are tilted towards a further rate increase in the new year. Betashares chief economist David Bassanese said the RBA was concerned that the longer inflation stays high, the more likely it will be that workers will use their bargaining power to demand bigger pay rises. Mr Bassanese said the current low productivity growth was exacerbating the problem, driving the growth in unit labour costs outside the farming sector to above 6 per cent. In determining if there will be another rate rise, he said much will depend on the extent to which demand for workers eases.