Slow wage growth looks set to continue for Australian workers and remains a potential drag on the economy and pay packets, the Reserve Bank has signalled.

Key points: GDP growth slightly upgraded to be between 2.75-and-3.75 per cent by the middle of next year.

GDP growth slightly upgraded to be between 2.75-and-3.75 per cent by the middle of next year. Inflation not expected to return to RBA's target inflation band for at least two years.

Inflation not expected to return to RBA's target inflation band for at least two years. Unemployment expected to constrain wage growth "in the period ahead"

In its quarterly statement on monetary policy, the RBA said low wages growth is complicating the return to a normalised level of inflation of between 2 per cent and 3 per cent.

"Wage growth is low. Although it seems unlikely that wage growth will slow much further, wage pressures are expected to pick up only gradually," the statement said.

The RBA noted a pick-up in wages growth is reliant on the structural adjustment in the wake of the mining investment boom which is "continuing to wane".

However, the RBA described the transition out of the mining boom as "well advanced" and the negative spill-over on non-mining investment beginning to ease.

Unemployment — forecast to remain between 5 per cent and 6 per cent until June 2019 — is also expected to "constrain wage outcomes in the period ahead," the RBA warned.

The RBA also said wage growth is threatened by the underemployment rate which "has been higher than its past relationship with the unemployment rate would imply".

The RBA slightly upgraded its forecasts for economic growth by 0.25 percentage points for June 2018, with GDP growth now forecast to pick up to between 2.75 per cent and 3.75 per cent by the middle of next year.

Both headline and underlying inflation are forecast to return to the 2 per cent to 3 per cent target band by June 2019.

March quarter inflation released by the ABS last week saw headline inflation return to 2.1 per cent, the bottom of the RBA's comfort zone.

The impact of Cyclone Debbie earlier this year prompted the RBA to make minor changes in its growth outlook.

It said exports of coking coal are expected to fall with prices temporarily higher due to shut mines.

But the RBA noted recently high iron ore prices are not expected to add to domestic demand because of their temporary nature.

However, the RBA said that if commodity prices do not fall as much as anticipated, the impact on growth and employment could outstrip official forecasts.

The RBA is also continuing to monitor risks to household balance sheets given high and rising household debt.

Yesterday RBA governor Dr Philip Lowe warned that wage growth would need to catch up to housing inflation to ensure the economy remained silent to burgeoning household debt.

RBA strategist Su-Lin Ong said the statement erred on the side of optimism in its base case for a return to 3 per cent-plus growth, an edging down in the unemployment rate and modestly higher inflation.

"What has changed is the RBA's confidence in these forecasts, largely reflecting the firmer global picture rather than any key domestic developments," Ms Ong noted.

She said the optimism in the statement challenged the view the RBA would cut cash rates again, although there was a significant risk the GDP forecasts may be too rosy.

"We note that first quarter GDP is shaping up on the soft side following yesterday's net exports which are set to detract from growth," Ms Ong said.

"Nevertheless, the RBA is likely to stick to this script until the data disappoint. First quarter GDP may be the first catalyst."

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