13 / 06 / 2018 productivity, wages and prosperity | speeches | rba speech productivity, wages and prosperity philip lowe [ * ] governor address to australian industry group melbourne – 13 june 2018 i would like to thank australian industry group ( ai group ) for the invitation to speak at this lunch today. i have participated in many ai group events over the years and i have always valued hearing from your members, so it is a pleasure to be here in melbourne today. the title i have chosen for my remarks this afternoon is ‘ productivity, wages and prosperity ’. i know that these three issues are important to your members and they are also important to the broader australian community. australians enjoy a level of economic prosperity that few other people in the world enjoy. per capita incomes here are high and so, too, is wealth per capita. we have also avoided bouts of high unemployment for over a quarter of a century now. our banking system is strong, we have worldclass natural resources and australians have access to high - quality health care and education. so there is much for us to feel fortunate about. the question is how do we sustain this prosperity? this is an important question to be asking. at the moment, there is unease in parts of the community about the future of work, about competition from overseas and about the implications of technology – all issues that i know the members of ai group are dealing with every day. for others in our community, these concerns are being brought into sharp focus by unusually slow growth in wages. as we address these important issues, we also need to keep focused on the critical task of raising national productivity. after all, lifting productivity is the key to building on our current prosperity and ensuring sustained growth in wages and incomes. there is no shortage of good ideas to consider here. http : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 06 - 13. html 1 / 15 13 / 06 / 2018 productivity, wages and prosperity | speeches | rba my remarks today will be in four parts. first, i will briefly cover the recent economic data. then, with that context, i will talk about some of the reasons why wages growth has been as low as it has. i will then turn to productivity growth. finally, i will say a few words about the recent monetary policy decisions by the reserve bank board. the recent economic data last week's national accounts contained positive news about the australian economy. over the past year

adequacy of capital and provisions. in view of the depth of the current problem, and the fact that it may be quite sometime before the global standards on these issues can be settled, regulators, in my view, must be ready to take the needed action to ensure that we address these risks in our financial systems systematically. this is why pillar ii is all the more important, because the essence of pillar ii is to ensure that financial institutions have adequate risk management process and capital, commensurate with their risk profiles. and this is why we are seeing increased vigilance by regulators and the financial institutions themselves, in terms of the rigour in the use of stresstests, which is essential in the environment of heightened volatility that superseded historical norm. the implementation of pillar ii is, however, a challenge, not only in terms of the technical and quantitative expertise for reviewing internal capital adequacy assessment process, or icaap, but also on qualitative aspects such as how to foster an on - going two - way dialogue with the supervised institutions that would enhance the icaap process. to meet this challenge, regulators need to establish a strong credibility so as to strengthen the impact of their recommendations and requirement on icaap, and in some cases, increase capital requirement to ensure capital appropriate to the material risks, not yet covered in pillar i. also, there are challenges on the legal and institutional capacity aspects on how to handle the more principle - based, and therefore, more institution - specific regulatory requirement. as for the bank of thailand, our progress on pillar ii implementation is continuing. by working closely with all stakeholders especially thai bankers, association, we have issued three prudential guidelines for basel ii since 2006. pillar ii formally took effect the end of last year, while pillar iii will be implemented in june this year. as far as pillar ii is concerned, we expect thai banks to put in place the icaap within this year and establish the comprehensive process by the end of next year. overall, we are on track with the implementation of basel ii, thereby reaffirming our commitment to international best practice. with this brief initial remark, it is my hope that this seminar would provide the needed knowledge and skills to supervisors from seanza countries for the challenges posed by pillar ii.