The Reserve Bank has played down expectations of wage rises for Australian workers and offered little hope to struggling retailers in an economic assessment that has pushed forecasts for the next interest rate rise until the end of next year.
In the minutes of its November meeting, released on Tuesday, the central bank appeared to concede that the experience of other advanced economies - where growth in wages had been low despite ongoing reductions in unemployment - might be unavoidable in Australia.
Globalisation and technology were likely to blame, the board found, which had led "wage growth to be less responsive to changes in the demand for labour, which could continue for a while".
If such a pattern were to continue, it could see a re-writing of the Phillips curve, one of the dominant forecasting models of the world's central banks for half a century - and a reconsidering of the link between wage inflation and high levels of employment.
"There was considerable uncertainty around when and how quickly wage pressures might emerge and about how much these would add to inflationary pressure," the board said.
The more pessimistic discussion among board members led them to conclude that underlying inflation would remain below its target of 2 per cent in the near term, only popping into the target zone by the end of next year.
"Retail price inflation had been low as competitive pressures in the retail sector had continued to restrain price rises. Prices for volatile items, such as fruit and vegetables, had fallen by more than expected," the board noted.
On housing, the board said the number of new houses being built peaked in 2016 and remained at relatively high levels, which had eased conditions in Sydney, while Melbourne's market remained stronger than elsewhere.
"In Australia, housing credit growth had edged lower in recent months, as lending to owner-occupiers had eased and lending to investors had stabilised at a slower pace," the central bank said.
Futures markets have not fully priced in an interest rate rise above the record low of 1.5 per cent until 2019.
Across the industries, strong beef exports have held up the agricultural sector, after wheat exports had to come down from the highs of a record harvest last year, while manufacturing and service exports also increased.
Overall, the growth forecasts had the economy humming along at 3 per cent for the next few years, but that could be higher, board members appeared to suggest, if policymakers took on more suggestions from the Productivity Commission.
"The [Productivity Commission] review had pointed to the importance of data and evidence-based policy making in areas such as health, city planning and land use, teacher training and market efficiency, with particular reference to energy markets," the board noted.
In October, the Productivity Commission's Shifting the Dial report recommended de-funding low-value healthcare procedures, charging drivers more for the use of roads, replacing pharmacies with dispensing machines and turning people with real-world skills into teachers in a series of proposals it said would add $80 billion per year to economic growth.
