Confidence in the labour market rose strongly in December, reaching its highest level since early 2008, but wage pressures remain tepid.

The Westpac McDermott Miller employee confidence index rose 6.8 points to 121.3 in the December quarter, where a reading of 100 separates overall optimism from pessimism.

"The labour market is in great shape according to employees," said Westpac chief economist Dominick Stephens. "Demand for workers has remained strong, and the official unemployment rate has fallen to its lowest in more than a decade. The shoe that has yet to drop is a pickup in wage inflation."

The biggest contributor to the quarterly result was a sharp lift in households' perceptions of current job opportunities that rose to 28.1 from 12.4 in the prior quarter.

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This measure tends to closely follow the official unemployment rate which stands at 3.9 per cent.

The survey also saw a strong lift to 21.7 from 10.3 in perceived job security. It was its highest since September 2007 – another sign that firms are looking to hold on to good workers in a tight labour market, said Stephens.

Expectations of future job opportunities saw a more modest gain, rising to 1.2 from negative 0.2.

However, while the balance of workers reporting higher earnings over the past year rose in the December quarter, this merely reversed a fall in the previous two quarters, he said. It stood at 30.2 from 22.8 in the prior survey.

Meanwhile, expectations for pay increases during the next year actually fell to 25.6 from 27.5.

"Moreover, both of these measures have been moving back and forth within a narrow range for several years, with no clear sign of a pick-up in the years since the Global Financial Crisis," said Stephens.

- BusinessDesk