(Image: AAP/Deam Lewins)

According to policymakers, your wages are going to start growing properly again once unemployment reduces further and unused capacity in the economy is used up. Only problem is, New Zealand is already at that point, and it’s not happening.

Despite the claims of some “turned the corner” optimists eager to spot a turnaround in the years-long wages stagnation endured by Australians workers, the view of the Reserve Bank is that any substantial lift in growth is a ways away, and we’ll only get there “gradually” — the RBA’s new buzzword. As the RBA governor, Phil Lowe said in a speech in Adelaide on Tuesday night, in which he used it seven times:

… our central scenario is for a gradual pick-up in wages growth, a gradual lift in inflation, and a gradual reduction in the unemployment rate. While we might like faster progress, it is encouraging that things are moving in the right direction and are likely to continue to do so.

That gradualism suggests forecasters like AMP’s chief economist Shane Oliver may be right in seeing no interest rate rises from the RBA until 2020, rather than 2019 (it used to be later this year, but the end of the RBA’s record period without a rate rise keeps being pushed back).

But even if we gradually reach the point where unemployment falls low enough to start pushing on wages, what if nothing happens? Because that’s what’s happened across the ditch. New Zealand’s unemployment rate was 4.4% in the March quarter, down from 4.5% at the end of last year and well below Australia’s 5.6%. If we had a 4.4% unemployment rate, you can bet the RBA would already have at least one rate rise under its belt, and looking at perhaps two or three more this year.

But Kiwi workers are suffering the same stagnation as us (and most workers across the western world). NZ’s labour cost index climbed by just 0.3% in the March quarter, for an unchanged annual rate of 1.8%, slower than expected. And like Australia, it’s government spending in the health and social care sector that’s propping up what little wages growth exists: only the introduction of a big pay rise for aged care and disability workers meant wages didn’t grow by even less. Economists say the share of NZ workers receiving no pay rises is at the highest level since 2010.

So even with unemployment more than one percentage point below ours, New Zealanders are still stuck with stagnant wages. Indeed, New Zealand really challenges the “wages will rise when spare capacity is used up” thesis: it has a much higher participation rate than us — 70.8% in the March quarter (down from 70.9%). We were chuffed a fortnight ago when our participation rate hit a record high of 65.7%, more than five points lower. NZ appears a lot closer to using its full economic capacity than us.

It’s also worth noting that New Zealand has a much more employer-friendly industrial relations system with fewer rights for workers and unions than in Australia, which would undermine the capacity of unions to extract larger pay rises even in favourable bargaining conditions such as low unemployment.

Still, don’t expect the government or the RBA to abandon it’s “wage growth … eventually” narrative any time soon. The implications of the alternative — that industrial relations laws have been tilted too far in favour of corporations against workers — are too unpalatable.