Pay rises of between 2-3% are “the new normal” due to higher participation rates but wage rises are unlikely to fall further, the Reserve Bank deputy governor, Guy Debelle, has said.

In a speech to the Australian Council of Social Service conference on Tuesday, Debelle said 80% of firms believed wage growth would be “stable” in the next year. Only 10% anticipated stronger growth.

Debelle noted that “healthy” employment growth of 2.5% for much of the past three years had been accompanied by rising participation among women aged 25 to 54 and older workers, blunting expectations of stronger wage growth.

The RBA forecast that GDP growth would gradually increase in the next couple of years, causing a “small decline” in unemployment from 5.25%, but it expected wage growth “to remain largely unchanged at its current level over the next couple of years”.

Shadow treasurer, Jim Chalmers, seized on the speech, noting “the damning point that there’s been a step change down in wages growth under the Liberals”.

“Under Morrison and Frydenberg feeble wages growth has become the new normal,” he said.

Debelle said wage growth had “declined noticeably since around 2012”, with a “sharp fall in the share of jobs receiving ‘large’ wage rises”. Wage growth had recovered slightly to 2.3% after six years of stagnation.

“There is growing evidence to suggest that wage adjustments of 2-point-something per cent have now become the norm in Australia, rather than the 3–4% wage increases that were the norm prior to 2012,” he said.

Debelle cited the growing share of enterprise agreements with annual pay rises of 2-3%, rising from 10% of agreements in the 2000s to almost 60% in 2019. Median wage rises had also fallen from 4% before 2012 to 2.5%.

Debelle noted that “on average, a promotion leads to a 5% boost in hourly wages, which is comparable to the wage rise a worker gets when switching firms”, echoing findings of a treasury paper released in July.

But since 2012 “there has been a broad-based decline in the proportion of employees that are getting promoted at work or switching jobs”, meaning fewer workers were reaping pay rises.

Debelle also argued that wage rises were stuck at 2-3% as they were “clumping” at the rate of expected inflation, using the RBA’s inflation target as a guide. However, Fair Work Commission-ordered increases in award rates had exceeded 2%.

Debelle said the proportion of firms expecting stable wages growth of between 2-3% had “steadily risen over time”, supporting the case that lower wage rises had “become the new normal”.

The proportion of enterprise agreements with terms of three years or longer had also increased, suggesting that pay increases of about 2.5% for workers on collective pay deals “will persist for longer than in the past”.

“The more wages growth is entrenched in the 2s, the more likely it is that a sustained period of labour market tightness will be necessary to move away from that,” he said.

“At the same time, I don’t think there is much risk in the period ahead that aggregate wages growth will move any lower.”

Debelle said a gradual lift in wages growth “would be a welcome development for the workforce and the economy”, helping the RBA reach its inflation target.

The RBA governor, Philip Lowe, has consistently called for wage rises, including by abandoning public sector pay caps.

Debelle said the “surprising strength in labour supply has been one of the factors that has contributed to wages growth being slower than we had expected”, while lower wages had also “probably contributed to the strength in employment growth”.

The female participation rate was at its highest rate, and the gap between female and male participation was the narrowest it had ever been as more households had access to childcare.

“Another factor that is linked to higher rates of female participation over recent decades is the increase in the level of mortgage debt of home owners,” he said.

Debelle said the effect of the ageing population was being outweighed by “a long-term trend for each cohort to participate more than previous cohorts did at the same age”.

“That trend has accelerated recently, and more than offset the effect of ageing on its own,” he said. “The share of 55-year-olds and older that are employed is 35%, compared to 22% 20 years ago.”

Debelle attributed the rising participation rate to improved health, less manual work, and availability of part-time work, meaning that retirement was not an “all-or-nothing” decision.

The rise in the pension age to 67 had also boosted the participation rate by about 0.1 percentage point, he said.