The Shadow Assistant Minister for Treasury says productivity growth is the key to wages growth after the Reserve Bank of Australia warned the government needs to do more.

Reserve Bank Governor Philip Lowe has lowered the RBA’s forecasts, telling the government’s Economics Committee in Canberra that the economy is at a “turning point”.

Wages growth remains sluggish after a rise in public sector wages was at 0.8 per cent in the June quarter, surprisingly higher than the 0.5 per cent increase in the private sector.

Dr Lowe suggested the government should spend more on infrastructure or commit to structural policy changes to stimulate the economy.

Shadow Assistant Minister for Treasury Andrew Leigh tells Ross Greenwood productivity is too low.

“Where we can get productivity growth going then we can get those real wage gains.”

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Image: Getty/ Stefan Postles