The weak wage growth afflicting Australia and other countries is the result of heightened competition brought on by globalisation and technology, Reserve Bank of Australia governor Philip Lowe says.
Dr Lowe has highlighted the nation's limp wages growth as one of three key questions occupying the central bank at present, saying that even though the unemployment rate is partly responsible, there are "structural" factors driven by perceptions of competition and changed workplace power relationships.
Speaking at an Australian Business Economists dinner in Sydney on Tuesday evening, Dr Lowe said average annual wage increases of two to 2.5 per cent are now the norm in Australia, whereas in previous years the average had been 3.5 to four per cent.
Australia not being at full employment - estimated to be at five per cent unemployment - was one factor keeping wages down, Dr Lowe said, but workers' perceptions of increased competition were also having an effect.
"Many workers feel there is more competition out there, sometimes from workers overseas and sometimes because of advances in technology," he said.
While globalisation and new technology had once most affected manufacturing, those forces were now affecting all sorts of jobs, including those in service industries.
"This shift, together with changes in the nature of work and bargaining arrangements, mean that many workers feel like they have less bargaining power than they once did," Dr Lowe said.
Employers are also feeling competitive pressure, the RBA boss said, with the result being that businesses are not bidding up wages as they once might have done to attract labour.
Dr Lowe said the current situation may persist "for a while", and keep inflation low, however the normal play of supply and demand in the labour market has not been destroyed.
"Tighter labour markets should still push up wages and prices, even if it takes a little longer than we are used to," he said.
Dr Lowe also named Australia's high and rising levels of household debt and how the wind-down of the mining investment boom will affect the economy as other key questions the RBA has been grappling with.
