Compensation of employees increased in all states and territories, resulting in a national quarterly growth of 1.2 percent and yearly growth of 3.0 percent.
This left the annual at 2.8 per cent, up smartly from 1.8 per cent previously as the 0.4 per cent growth contraction recorded in the September quarter 2016 dropped out of the equation.
This led the sector to be the only one to have contracted over the a year ago, down by 0.7 per cent since the September quarter of 2016.
The Australian dollar has dropped sharply on the result, from 76.13 USA cents ahead of the 1130 AEDT release to 75.84 U.S. cents at 1132 AEDT.
The quarterly expansion took the annual rate of growth to a healthy 2.8 percent, slightly below expectations but broadly in line with the central bank's forecasts, the Australian Bureau of Statistics (ABS) figures showed.
But household consumption grew by just 0.1% in the quarter and is tracking weak growth levels not seen in nearly a decade.
The main driver of economic growth had been public and private investment.
Corporate sentiment is high, buoyed by strengthening global growth and robust exports, contributing to a jump in private investment over the quarter.
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Capital Economics' chief economist for Australia and New Zealand Paul Dales said he did not expect GDP growth next year to meet the RBA's 3.0 percent forecast.
"This is above the OECD (Organisation for Economic Co-operation and Development) average and puts Australia back up towards the top of the pack for major advanced economies around the world".
Meanwhile, spending on electricity, gas and other fuels went up 11.5 per cent and cigarettes and tobacco went up 11.1 per cent.
Public investment actually decline during the quarter, mainly due to a payback effect after a big boost in the June quarter from the acquisition of the Royal Adelaide Hospital from the private sector last quarter.
Bill Evans, chief economist at Westpac, said pressure is building on consumers and it is forcing a change in spending patterns that threatens to choke off growth.
Weak wages growth weighed on household budgets again, despite the declining unemployment rate.
Monthly retail sales released Tuesday showed a return to stronger consumption at the start of the fourth quarter after a dismal winter of spending Down Under, but economists pointed out that the gains were largely a statistical rebound.
"We have seen an increase of more than 1000 jobs a day".