Dr Lowe said he hoped that relative low jobless rates in many developed economies would "energise" labour markets and workers into demanding higher wages.

"At some point, one imagines that's going to lead to workers being prepared to ask for larger wage rises.

"If that were to happen it would be a good thing."

The remarks come at a critical time in Australia, which has ground through more than four years of declining wages growth – now running at 1.9 per cent a year, the lowest rate in data going back to the late 1990s. Real wages have also been contracting the most since the last recession more than a quarter century ago.

They also reflect the reality that without signs of a sustained pick-up in wages and inflation more generally, the Reserve Bank won't be able to normalise its record-low official interest rate setting.

Without a boost in household spending, spurred by rising incomes, the Reserve Bank and federal government's hopes of economic growth accelerating back above 3 per cent will fall short, with gross domestic product expanding by an annual 1.7 per cent last quarter.

In evidence that helps support Dr Lowe's argument, the jobless rate fell last month to a four-year low of 5.5 per cent.

That's just 0.5 percentage points above the 5 per cent level the Reserve Bank now regards as "full employment". If the unemployment rate falls below that mark, the central bank's internal economic modelling implies that a deepening shortage of available workers would drive up wage inflation.


"It's an interesting disinflationary world in which we now live," said Stephen Walters, chief economist at the Australian Institute of Company Directors. "It wasn't that long ago that central bankers were more keen to keep a lid on inflation and associated wage claims at all costs, insisting they were in return for productivity improvements.

"They still do, of course, but the emphasis has changed," he said, noting that the company profit share had reached multi-decade highs relative to wages. "It makes sense that the governor would want to the power balance to shift a touch."

In an op-ed for Tuesday's Financial Review, Business Council of Australia chief executive Jennifer Westacott writes that the sense of resentment in the community over the changing economic outlook "is real, and it must be understood".

"Economic liberalisation is a social compact. In exchange for rising incomes to help them look after their local needs, people are asked to accept an ever-changing economy with industries that rise and fall with the tide of global progress.



"After a decade of phenomenal income growth, built on the back of a deregulated economy that reaped the benefits of increased global trade, business investment has now slowed and wages growth has fallen flat."

A clearly exasperated Dr Lowe suggested to the forum that there was too much fretting over a so-called "crisis in the labour market", pointing out that jobless rates in the US, Germany, the UK and Japan were at their lowest levels in decades.

"If you just listen to this idea that there's a crisis in the labour market you wouldn't have thought that [possible].

"The crisis really is in real wage growth."

Dr Lowe challenged the notion that a fall in hours worked – which many economists point to as negative flipside of a relatively low jobless rate in Australia – was a bad thing.


"Actually I can see an upside in this, too, because this distinction between part-time and full-time employment is old fashioned – there are a lot of people who work part-time who actually want to work part-time.

"The fact that we're working a few less hours on average is probably a good thing, not a bad thing or a sign of weakness."

The real source of unhappiness, he argued, was the lack of a willingness among workers to make the case for higher wages.

Fears around a lack of productivity growth, as technology impacts the labour market, were likely to be short-lived.

"Productivity growth tends to come in waves and in the optimistic interpretation we'll see another wave some time not too far down the track.

"A second factor is that workers feel like there are more competitors out there, they're worried about the foreigners and the robots."

Dr Lowe said it was clear the labour market was "actually quite tight" in a number of countries.

"Hopefully running for a few years now with quite tight labour markets [will be] re-energising workers to get more of the labour share".


While the governor acknowledged calls for a so-called "living wage" to help workers who miss out as a result of technology or competition, he warned that "in the end, I don't think that's the solution here".

Speaking as the Senate faces off this week over the government's planned increased schools funding package, Dr Lowe said ultimately most of the problems of competition, technology and job security would be addressed through investment in education.

He chided those "bemoaning technology's" impact on the labour market. "Does anyone think here we can make ourselves wealthier by not having improvements in technology, by going backwards on technology. It's really fanciful."

National Australia Bank chairman Ken Henry said unlike the last time wages growth fell – in the second half of the 1990s when it was a "deliberate government policy" – the current episode is unwelcome.

"I don't hear anyone arguing that it's a good outcome. There's something different going on here."