Wages rose 0.8% from April to June

From April to June, the Wage Price Index (WPI) rose 0.8% in seasonally adjusted terms.

That's down slightly from March (0.9%), and overall wage growth is still significantly down compared to 2023 when the annual rate was above 4%.

However, it remains above inflation, which was 0.7% through the quarter and 2.1% annually, or 0.6% and 2.7% for 'underlying' inflation which excludes volatile prices.

In real terms (how much purchasing power people have with their money) wages continue to slightly increase.

Productivity concerns abound

For some policy makers and economists the greater concern is how much output (in terms of goods and services) Aussie businesses are getting from their workers.

At Tuesday's press conference after the RBA monetary policy decision, many of the questions directed at governor Michele Bullock were about labour productivity, given the Statement on Monetary Policy downwardly revised its assumptions on productivity growth.

Labour productivity, measured in GDP per hour worked, has been getting worse for a while, declining 1% over the year to March.

There have been concerns for a while that wages going up as productivity gets worse is potentially inflationary, but Ms Bullock yesterday said the downward revision to productivity estimates doesn't have implications for prices.

"The output gap [between supply and demand] isn't changing, it's just we're lowering the potential growth rate," she explained.

Westpac Chief Economist Luci Ellis says the RBA believes households and businesses have adapted to slower productivity growth, slowing wage increases.

"This change in view has not boosted the inflation forecasts, but if anything has reduced the RBA's view of upside risks to inflation from [labour productivity] and made it less nervous about future rate cuts," she said.

What is productivity and why does it matter?

Productivity measures how much is produced by the labour force.

As technology and expertise increases, the output of an individual worker and the collective workforce usually also increases - think how much a farmer could harvest in a day's work after the invention of the tractor compared to before.

In Australia though, labour productivity growth has been stagnant for years, a headwind on real economic growth even if the RBA now deems it not much of a threat to price increases.

This is due to various factors, but is principally due to a slowdown in mining investment, and a large proportion of jobs added in sectors where it's harder to measure productivity e.g. healthcare. 

Treasurer Jim Chalmers is hosting a "productivity roundtable" with business leaders and institutions seeking to come up with solutions to improve the situation.

What industries are wages going up most?

Public officials saw their pay packets increase by 1% from April to June compared to 0.8% for the private sector.

The sector with the most wage growth was public administration and safety, up 1.1% through the quarter, followed by professional, scientific and technical services (up 0.9%).

Industry wise, mining wages went up 1.3% q/q and 3.4% through the year, while electricity, gas, water and waste service employees also saw 1.3% wage increases through the quarter, and 5% annually, more than any other industry.

It was less positive for nurses and teachers though as healthcare and social assistance wages rose just 0.3% through the quarter, education and training 0.5%. 

However, both saw healthy annual wages growth, suggesting this is more to do with the time of year than anything - in many states for example the Teachers Union bargain agreements are to come later in the year