* Q3 wages rise 0.6 pct q/q, 2.3 pct y/y as forecast
* Modest pick up courtesy of minimum wage award
* Consumer sentiment improves, but not on spending plans
By Wayne Cole
SYDNEY, Nov 14 (Reuters) - Australian wages rose at the fastest annual pace in almost three years last quarter but only thanks to a mandated increase in minimum wages, while growth in much of the private sector stayed stubbornly muted.
Data released on Wednesday by the Australian Bureau of Statistics (ABS) showed its wage price index rose 0.6 percent in the three-months ended September, from a downwardly revised 0.5 percent in the previous quarter, and matched analyst's expectations.
Annual wage growth climbed 2.3 percent, in-line with forecasts and the fastest pace since late 2015.
However, the lift owed more to a 3.5 percent increase in award and minimum wages than to any demand-driven pick up.
Indeed, growth in the private sector remained at 2.1 percent, only two ticks above the all-time low, while public wages expanded at 2.5 percent.
Not a single industry paid more than a 2.8 percent increase for the year, with healthcare and education leading the pack.
Mining managed only 1.8 percent, a world away from the 6 percent-plus pace enjoyed during the decade-long mining boom that began in the early 2000s.
"There are signs that tighter conditions in some sectors are now translating into an acceleration in wage growth, but the pick-up is far from broad-based," said Sarah Hunter, chief Australia economist for BIS Oxford Economics.
"We expect the labour market to continue to make steady progress towards full employment. But it will be another 12-18 months before the pace has decisively risen above inflation."
The miserly pace of pay awards is a major reason the Reserve Bank of Australia (RBA) does not see core inflation reaching the mid-point of its 2 to 3 percent target band until the end of 2020 at the earliest.
WHERE'S THE CHRISTMAS CHEER?
There are hopes employers will become more generous given Australia's jobless rate unexpectedly dived to 5 percent in September, the lowest since 2012 and down from 5.3 percent the month before.
The RBA had not expected the jobless rate to reach 5 percent until sometime in 2020, so the drop sparked some speculation that interest rates might rise earlier than previously thought.
Yet the RBA showed no inclination to move at its November policy meeting last week, keeping rates at 1.5 percent where they have been since mid-2016.
While the bank nudged down its long-term forecast for unemployment to 4.75 percent, it emphasised there was still slack in the labour force. Underemployment, which includes those who want to work more hours, has held stubbornly high at 8.3 percent.
Policymakers are also concerned that falling home prices in Sydney and Melbourne might make consumers reluctant to spend, a trend seen in the latest survey of sentiment.
The Melbourne Institute and Westpac Bank's WBC.AX measure of whether it was a good time to buy a major household item slipped 3.5 percent in November to an 18-month low.
That came even as overall sentiment increased by 2.8 percent in November as respondents became more upbeat on their finances and the long-run economic outlook. to our annual question on Christmas spending plans also point to a subdued near term outlook for demand," said Westpac Chief Economist Bill Evans.
"Despite the higher reads in overall confidence this question suggests that we are unlikely to see any improvement over last year's lacklustre Xmas spend."