Low wage growth will persist in Australia for some time, the Reserve Bank has warned, with the situation worsened by new workplace agreements containing smaller pay rises coming into effect.
A day after RBA governor Philip Lowe said a lift in wages would be "a welcome development" for the economy, the central bank said stagnation in paypackets will be worsened in the near term by new enterprise bargaining agreements struck on lower wage rises than the deals they replace.
"Other things being equal, this will induce some inertia that will limit overall wage growth for a time," the RBA said in its quarterly Statement on Monetary Policy, released on Friday.
The bank said it will be some time before Australia's unemployment rate drops to what it considers full employment and also before the limp inflation rate - currently at 1.9 per cent - reaches the midpoint of its preferred two to three per cent target band.
Wage growth would be a key determinant of how quickly inflation increases, the RBA said.
On Thursday, Dr Lowe told an economics forum that a boost in wages growth would be welcome as the current weakness was dampening consumer spending and affecting households' ability to pay down debt, which is uncomfortably high.
Meanwhile, the RBA on Friday addressed the recent turmoil on global stock markets, where in the US Wall Street plunged in Thursday trading on renewed fears of higher inflation, triggering a fall in Australian stocks on Friday.
The volatility on global stock markets has not derailed optimism over continuing corporate earnings growth, the bank said.
The RBA said, while global stock prices have fallen as bond prices rise and investors worry about rising inflation, equities remain higher than they were a year ago "reflecting the strengthening global economy and expectations of ongoing strength in corporate earnings over the next few years".
