RBA governor Phil Lowe said today that for Aussie inflation to hit its 2-3% target, wages can only grow at circa 3.5% pa, or 2.5% plus 1% productivity. The RBA's currently preferred measure of labour costs, Unit Labour Costs (wages less productivity), have risen from 6.3% pa (quarterly annualised) in Q4 to 8.1% in Q1 2023 (quarterly annualised). In Q1 2023, the 6mth annualised rate was 7.4%. Over the past year, Unit Labour Costs are up circa 8%. Excluding COVID distortions, that's the fastest annual growth in Unit Labour Costs since the early 1990s. Unit Labour Costs are how much a business pays workers to produce one unit of output or the average cost of labour per unit of output produced. Unit Labour Costs are the ratio of total labour compensation per hour worked to output per hour worked or labour productivity. Bottom line is current Unit Labour Costs are massively inflationary.