policy has been an important factor. the improved inflation environment has allowed consumers and businesses to manage their finances with greater certainty about the future purchasing power of their savings and income. interest rates have also been lower and less variable in both nominal and real terms across a range of maturities. and by working to stabilize inflation, monetary policy has helped dampen economic cycles and mitigate fluctuations in employment. in addition, there is direct evidence that low, stable and predictable inflation has improved the efficiency of labour markets by eliminating inflation uncertainty as an important friction in wage bargaining and allowing wage changes to provide genuine signals to market participants regarding the demand for and the supply of workers. as inflation has become more stable and predictable, the variability of aggregate wages has declined. the standard deviation of labour income per worker has dropped by about 45 per cent. at the same time, with less uncertainty about inflation, the distribution of wage changes has narrowed. in the unionized private sector, the standard deviation across individual wage settlements fell by about a third, improving the efficiency of the labour market and the perception of fairness around wage setting. in addition, since 1991, the average duration of labour contracts has almost doubled, from about 20 months to 39 months, and there has been less need for cost - of - living allowances ( colas ) in wage contracts ( chart 3 ). the number of labour contracts with cola clauses has declined from 21 per cent to less than 5 per cent. longer contracts and less disagreement about future inflation have also meant fewer strikes. the hours lost to strikes peaked in the early - to - mid - 1970s when inflation was at double - digit levels and uncertainty was high. since then, the time lost has fallen sharply ( chart 4 ). total hours lost to strikes fell by 66 per cent from the pre - inflation - targeting era to today. with statistics canada stopped collecting data on vacancies in 2003, since the widespread adoption of the internet has changed the way vacancies are advertised. bis central bankers ’ speeches inflation low, stable and predictable, workers and firms are spending less time and fewer resources negotiating and striking, and more time creating value and income. recession and recovery let ’ s fast forward from the past 40 years to the past five. many workers in canada felt the severe impact of the global financial crisis that began in 2007. when the united states fell into recession, canada was affected through trade, financial, and confidence channels. but with our well - regulated financial system, a credible monetary policy

ways that don ’ t require the active input of policymakers. the so - called “ invisible hand ” of markets can provide the incentives for producers and consumers to alter their behaviours via a range of price signals. the exchange rate provides one such signal. the earlier substantial appreciation of the australian dollar in response to very high prices for our commodity exports was a signal for labour and capital to move into the resources sector. 11 but, for a time, the australian dollar stayed high even after mining investment and commodity prices began to turn down. that meant that it was not playing the usual role of helping to rebalance growth towards other parts of the economy. however, the australian dollar has depreciated by nearly 20 per cent ( on a trade - weighted basis ) since its peak in mid 2013 and is starting to play a role in helping the economy to adjust. australians and foreigners will direct more of their spending to australian produced goods and services ( such as tourism and education ) as they become relatively cheaper compared with the alternatives available offshore. along the same lines, the depreciation has lowered the level of australian wages when measured in foreign currency terms ; since april 2013, they are 30 per cent lower in us dollar terms. while the depreciation seen to date will be helpful, our assessment is that our exchange rate remains relatively high given the state of our overall economy. lowe p ( 2015 ), “ low inflation in a world of monetary stimulus ”, address to the goldman sachs annual global macro economic conference, sydney, 5 march. plumb m, c kent and j bishop ( 2013 ), “ implications for the australian economy of strong growth in asia ”, rba research discussion paper no 2013 – 03. bis central bankers ’ speeches a change in the growth of wages ( in australian dollar terms ) is also an important source of adjustment. just as wage growth picked up when conditions in the economy were stronger, the growth rate of wages has declined substantially since 2012 ( graph 4 ). the lower growth of wages works to depress the growth of incomes for those in employment. at the same time, however, lower wage growth allows for more employment than would otherwise be the case, which works to support the growth of total labour incomes. in a similar vein, the pick - up in productivity growth over recent years means that the cost of obtaining the labour required to produce a unit of output ( the unit labour cost ) has not changed for three years. in summary, the economy is currently operating