Australia's jobless rate has tumbled to a fresh low of 5.5 per cent, we learnt this week, but signs of life in pay packets have yet to emerge.

It's too dramatic to say that wages have stagnated. Pay packets are still growing, by a bit under 2 per cent a year.

But after taking into account consumer price rises of about 2 per cent a year, it's true to say that households have been treading water.

Ordinarily, workers should expect to get pay rises to compensate them for both the rising cost of living plus improvements in their labour productivity.

And one would also expect a tightening labour market to create upward pressure on wages.

So, what gives?

In a recent speech, Treasury's deputy secretary, Macroeconomic Group, Nigel Ray, offered some fresh and valuable insights.

In short, Ray reminds us that recent times have been anything but ordinary - the world economy is still buffeted by the fallout from the global financial crisis.

"But for Australia, the most influential economic event of recent decades was not the global financial crisis," says Ray.

"Rather, the performance of Australia's real economy over the past 15 years has been dominated by the largest mining boom in our modern history."

It is the impact of this mining boom that must be understood before one can make much sense of wages today, he says.

The impact on wage gains for households was profound.

Terms of trade surge

Significantly, the boom hit at a time when Australia's jobless rate was already very low. The massive ramp-up in investment in new mining projects in the mid-2000s created a surge in demand for workers in an already tight labour market.

Workers able to fly in and out of mining towns were rewarded with lucrative contracts, famously earning $150,000 a year for driving largely automated monster mining trucks.

But wage rises across the economy were generally more restrained, as increased labour market flexibility and reduced union power limited wage spillovers.

The real boon for most households came from the surge in Australia's terms of trade - the prices we must pay for imports, versus what we are paid for our exports. A turbocharged Aussie dollar helped Australians fill their homes with cheaper imports, meaning wages kept well ahead of increases in the cost of the basket of consumer goods purchased by households.

Indeed, during the mining boom workers enjoyed pay rises that put them well ahead of not only inflation but also increases in their labour productivity.

Ray illustrates this vividly in a graph showing the rise, since the early 1990s, in the "real consumer wage" versus the "real producer wage".

The "real consumer wage" is what consumers pocket in wages after adjusting for increases in the prices of things they buy.

For companies, the "real producer wages" is their wages bill compared with the prices they are paid for their outputs.

To be exact, for a moment, the real producer wage is average earnings per hour from the National Accounts, adjusted by the "GDP deflator", which captures both changes in domestic prices and export prices. The real consumer wage uses the same measure of wages and adjusts it by the "household consumption deflator", which captures only changes in the prices of things bought by households, and not export prices.

Ordinarily, in the long run, we expect to see both measures growing roughly in line with increases in labour productivity. But large swings in Australia's terms of trade - as we saw during the mining boom - can cause them to diverge. Which is exactly what happened.

Dollar fall provided relief

From the early 2000s, when the mining boom hit, the real producer wage continued to grow in line with productivity, but the real consumer wage shot much higher thanks to cheaper imports.

Since about 2011 when commodity prices peaked and the Australian dollar began to decline, however, household gains have flatlined, meaning the two concepts are converging again.

"At the aggregate level, the real consumer wage - that is, wages relative to the prices that consumers pay for goods and services -has been largely flat since the peak in the terms of trade," says Ray.

"This is a very unusual event. We have to go back to the years following the recession of the early 1990s to find another example in Australia."

But far from being a cause for concern, Ray says this subdued growth in labour costs has actually been one of the key ways the Australian economy has adjusted so well to the end of the mining boom.

Rather than sacking workers, firms have been able to limit wage increases instead.

This has helped to ensure the fall in the nominal value of the Australian dollar actually provides the real relief our export and import-competing firms have so needed, and hasn't just been offset by rising labour costs.

But how much longer should households be expected to shoulder this burden of adjustment?

Ray is optimistic: "We have some way to go in the cycle, so timing is uncertain. But we can reasonably expect that consumer wages and producer wages should eventually return to growing in line with productivity."

The Reserve Bank is similarly optimistic that the Australian economy is about 90 per cent of the way through its adjustment to the end of the biggest mining boom in living memory.

As the unemployment rate continues to fall, there is good reason to hope there are more normal days ahead.