Australian wage growth needs to pick up to push inflation closer to target levels, after pay packets increased more slowly than expected, the Reserve Bank of Australia said in minutes of its Feb. 6 meeting, at which it held its benchmark interest rate at a record low 1.5%.

"Growth in the wage price index in the September quarter had been weaker than expected and wage growth outcomes associated with new enterprise agreements had been lower than the percentage increases incorporated in agreements they were replacing," the RBA's board said in the minutes released Feb. 20.

"Inflation also remained low, but was expected to increase gradually as the economy strengthened and wage pressures rose," it said.

The Australian dollar fell 0.4% to U.S.$0.7887 by 11:08 am in London.

Separately, a senior official at the bank indicated the RBA is closely monitoring pockets of stress within the highly-indebted household sector but does not regard risks to the financial system from people struggling to pay their mortgages as being "particularly acute."

In an address to the Responsible Lending and Borrowing Summit in Sydney, Michele Bullock, the RBA's assistant governor for the financial system, said that the central bank was closely watching interest-only customers, many of whom could face an increase in loan repayments over coming years.

"The historically high levels of mortgage debt in Australia raises questions about the resilience of household balance sheets to a change in circumstances and the ability of the financial system to absorb a widespread increase in household financial stress," Bullock said. "The information we have suggests that, while there are some pockets of financial stress, the overall level of stress among mortgaged households remains relatively low," she added.