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Wage growth remains stuck at 20-year low

 

Wage increases remain stuck at their lowest level in at least two decades, barely keeping pace with inflation.

Little wonder confidence among consumers is under a cloud and posing risks to spending and economic growth more broadly.

The wage price index - the Reserve Bank and Treasury's preferred measure of wages growth - rose 0.5 per cent in the June quarter, keeping the annual rate at 1.9 per cent.

Private sector wage growth was even more benign, rising 0.4 per cent in the quarter and 1.8 per cent over the year.

The consumer price index was running at 1.9 per cent over the year to June, although this disguises lumpy price increases, such as those for electricity, which were up nearly eight per cent annually.

Even wage growth under enterprise bargaining agreements is in decline.

Figures released earlier this week showed annualised wage growth under those agreements was 2.7 per cent as of March, which federal Labor says is the lowest since 1991.

Prime Minister Malcolm Turnbull insists his government is tackling issues that matter most to Australians, including jobs, wages, electricity and gas prices.

"Tackling the cost of living for households, families and businesses. That is our focus," he told parliament on Wednesday.

But unions are calling it a wage crisis.

"Working families are struggling as their wages fail to keep up with the rising cost of living," ACTU Secretary Sally McManus said.

"These numbers show Australia's growing inequality crisis."

Macquarie Research economist Shane Lee believes low wage growth is a key hurdle to stronger economic growth.

"We expect the recent run of solid employment growth to continue in the months ahead but without workers having confidence about their income growth prospects, they are unlikely to be confident about lifting spending," he said.

ANZ senior economist Felicity Emmett expects wages will pop higher in the September quarter to take into account the 3.3 per cent rise in the minimum wage from July 1.

However, further out wage growth is likely to be only gradual given the spare capacity in the labour market, especially the elevated level of underemployment.

July labour force figures are released on Thursday.

Economists expect the number of people employed rose by around 20,000, building on the strong outcomes of recent months.

This may see the jobless rate tick-down to 5.5 per cent from 5.6 per cent, the lowest level in over four years.