population growth, and hence the growth of the labour force, has been a bit lower than we ’ d assumed. in the face of fewer employment opportunities over recent years, particularly in resource - related industries, there has been a decline in the ( net ) number of immigrants arriving to seek work. while we ’ d expect the labour supply to respond to economic conditions in australia relative to those overseas, the adjustment has been more pronounced than earlier anticipated. • second, wage growth declined as spare capacity in the labour market increased. this is also unsurprising, but the adjustment has been larger than suggested by historical experience. this has probably encouraged more employment growth than otherwise and improved the cost competitiveness of australian labour. it also acts as a signal to encourage adjustment in the supply of labour. • third, the composition of growth may be playing a role in boosting demand for labour. while aggregate economic activity has grown at a below average pace, conditions in labour - intensive parts of the economy seem to have improved. • finally, the key sources of data – the labour force survey and the national accounts – are both subject to measurement error and are often revised. it is possible that the current data are providing a noisy signal of what is actually happening. i ’ ll go over each of these points in turn and then come back to a discussion of the likely implications of these developments for the economic outlook. recent developments changes in population growth as recently as may, official data suggested that the working - age population had been growing by about 1. 7 per cent per annum, and it was expected to continue at about that rate in the foreseeable future. however, the most recent data from the abs suggest that total population growth had dropped quite noticeably over the past year or so, from 1. 8 per cent over 2012 to 1. 4 per cent over 2014 ( graph 2 ). estimates of the working - age population are expected to be revised down accordingly in coming months. bis central bankers ’ speeches graph 2 the decline in population growth was mainly the result of a decline in net immigration. this appears to be related to the weakening in australia ’ s labour market conditions relative to those of other countries. 1 of course, people on temporary skilled - work visas ( so - called “ 457s ” ) leave for home when their jobs end. but there has also been a large decline in net immigration from new zealand. labour market conditions in new zealand tightened at the same time that spare capacity in the australian

in recent years. even though measured gdp growth has remained moderate over the past year or so, the unemployment rate appears to have stabilised and demand for labour has picked up. flexibility in labour markets has played a role in these adjustments. one aspect of that has been some change in the growth of the labour supply via changes in the extent of immigration. another aspect of the adjustment has been the very low growth of wages, which has helped to support a pick - up in employment growth. the improvement in labour demand is consistent with the rise in consumption growth, strong dwelling investment and an increasing contribution to gdp from net services exports. it is also apparent in improvements in survey measures of business conditions, vacancies and employment in the service sectors. while there is uncertainty around our forecasts, including because of the usual noise in data, these developments suggest that there will be slightly less spare capacity in the labour market than earlier anticipated. in particular, we expect the unemployment rate to be little changed from recent levels over the next 18 months or so, before declining in 2017. bis central bankers ’ speeches