Treasurer Scott Morrison has rejected concerns modest wage growth will undermine the government’s revenue forecasts.

The wage price index – the Reserve Bank and Treasury’s preferred measure of wages growth – rose just 0.5 per cent in the March quarter, proving even more subdued than the modest 0.6 per cent increase predicted by economists.

It left the annual rate at 2.1 per cent, data from the Australian Bureau of Statistics showed, just ahead of inflation and close to the lowest in at least two decades.

Labor seized on the figures this week, saying it was now very difficult for the government to meet its forecasts and projections set out in the May budget.

But Mr Morrison has told reporters in Sydney on Friday the problem was being ‘massively overstated’.

‘When you have more people in a job, that lifts government’s revenue because they’re paying taxes and not receiving welfare cheques,’ Mr Morrison said.

He acknowledged the wage price index was moving at ‘modest levels’ and improvement was needed.

‘We believe it will improve when you take into account what is increasingly happening at the moment (which) is sign-on bonuses for people going into new jobs,’ he said.

‘That growth was 2.7 per cent over the course of the year.’

The government’s forecasts on growth were more modest than the Reserve Bank and the International Monetary Fund and would stand the test of time, he said.