However, he warned "how things turn out on this front is likely to have a significant bearing on the next stage in the global economic cycle".

'Home to roost'

But Professor Buchanan argued the low growth was the result of decades of structural changes to wage institutions "come home to roost".

He said the move to enterprise bargaining in the 1990s had fundamentally changed a system "where the wages of the strong supported the weak", including by fragmenting and "quarantining" wage rises that previously flowed more broadly between occupations through awards and pace-setting industries.

He traced back the current slowdown not to the end of the mining boom but to "the decisive development" of the NSW government legislating a public sector wage cap in 2011, which limited increases to 2.5 per cent and was later replicated by state and federal governments.

University of Sydney labour economist John Buchanan warns there is no end in sight to low wage growth. Supplied

"The public sector had actually been keeping up wage norms," he said.

"But [former NSW Premier Barry] O'Farrell's move completely pierced the formation of any coherent wage leadership out of the unions. If you take wage leadership out of the system, anything goes basically, that's when you get the law of the jungle."


Professor Buchanan argued the labour market was now "starting to reach a critical point of institutional momentum".

"As the economy becomes more fragile, these cracks start to become more visible. It will be particularly visible in the next downturn, that's when you'll really see it."

AHRI national president Peter Wilson says low wage growth is "globalisation at work" and human resources managers welcome the opportunity to target pay rises better.

Pay rises restricted to 'talent'

Australian Human Resources Institute director Peter Wilson countered the adjustment was merely globalisation at work and HR managers were welcoming low wage growth as an opportunity to better target remuneration and become cost competitive.

"HR managers are actually pleased the general wage trends have reduced a bit," he said. "It gives them a bit of scope to award the ones that are key contributors and support growth and expansion in terms of a more effective distribution of wages."

He said a 4 to 6 per cent wage increase, once the norm, was now just "for valuable scarce talent and at the level of banking executives".

"The rest of the economy is quite different and needs to survive in a competitive role.


Professor Jeff Borland says it's a mistake to extrapolate short-term factors into long-term trends. Jesse Marlow

"Robotics and artificial intelligence mean it's getting very competitive at the low-skill end … certainly there's nothing I've heard from HR managers or CEOs that they want to increase wages because they've fallen at a low level."

'Perfect storm' short term

University of Melbourne economist Jeff Borland cautioned that people tend to over-predict trends when economic variables slow and under-predict them when they increase.

"I think there's been a perfect storm of short-run factors that have been depressing wage growth.

"I don't think the causes are so dominant that it means wage growth isn't going to return to higher levels at some point. Probably not tomorrow, but in the next couple of years."

But Professor Buchanan said the institutional factors could not be easily addressed.

"Huge changes have been made to break down the dams, the canals and the pipes that control the labour market. The labour market's not stock market and shares. It's going to take a long time to change direction."

He compared the current situation to the lyrics of Ol' Man River, which contrasts the struggles of labourers with the ceaseless and uncaring flow of the Mississippi river.

"As the song goes, 'it just keeps rolling along'."