What formula/conditional formatting will work for this?

Compute the average in a separate cell and then use the use formula option against this cell to assign the conditional format.

You can do what dflak suggests or you can bake the AVERAGE calculation right into your conditional formatting formula rather than using a separate cell. However, you are going to have two problems with either approach:

The big problem is that conditional formatting in a pivot table will be wiped out when the pivot table is refreshed. One way to overcome this is to create a mirror of the pivot table using formulas that reference the pivot table, and then apply conditional formatting to that.

Second, because this is a pivot table, the number of rows is subject to change so the AVERAGE function has to include the maximum likely number of rows that could be included. Therefore you cannot use the Grand Total option as the last row in your pivot table.