(Updates throughout with more detail from speech)
CANBERRA, Nov 26 (Reuters) - Wage growth in Australia looks to be stuck in the slow lane and it will take a sustained fall in unemployment to lift it to more economically desirable levels, a top central banker said on Tuesday.
In a speech on employment and wages, Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said there was growing evidence that wage growth had become entrenched in a 2-3% range, down from the former 3-4% norm.
This trend has been weighing on household incomes and spending, as well as dragging on the economy more broadly.
"A gradual lift in wages growth would be a welcome development for the workforce and the economy," said Debelle. "It is also needed for inflation to be sustainably within the 2–3% target range."
However, he held out little hope for an acceleration any time soon, noting the bank's liaison with firms showed 80% of companies expected steady wages growth and only 10% anticipated anything faster.
"The more wages growth is entrenched in the 2s (2-3% range), the more likely it is that a sustained period of labour market tightness will be necessary to move away from that," said Debelle.
The central bank has cut interest rates three times since June, taking them to a record low of 0.75%, in part to try and drive unemployment down toward its goal of 4.5%. So far, it has had little success, with the jobless rate stuck at 5.2%.
Markets are wagering the bank will cut at least once more to 0.5% and perhaps even adopt unconventional stimulus policies such as buying government bonds and providing cheap funding to banks.
RBA Governor Philip Lowe will give a speech later on Tuesday on the offshore experience of quantitative easing.
Debelle noted employment had actually grown faster than expected in recent years but so had the supply of labour, thus limiting the fall in unemployment and the rise of wage growth.
The increase in supply came mainly from an increase in workforce participation by females and those over 55 years old.
Female employment accounted for two-thirds of jobs growth over the past year, taking the female participation rate to a record high, he noted.
The share of 55 year olds and older that are employed had climbed to 35%, from 22% 20 years ago.
"One of the key sources of uncertainty currently around the outlook for the unemployment rate as well as wages growth, is whether labour supply will be as responsive to labour demand as it has been in recent years," said Debelle.