SYDNEY - [AAP] Australians can expect weak increases in their wages even as the unemployment rate drops and business investment starts to gather pace, according to the latest assessment of the economy from the Reserve Bank.

The RBA has lowered its expectations for improvements in the stagnant inflation rate, saying in its latest Statement on Monetary Policy that even though the economy is expected to expand over the next two years, low wages and tough retail conditions will keep inflation near the lowest limits of its preferred 2 to 3 per cent target band.

"A number of factors are serving to hold inflation down," the RBA said in its November quarterly statement on Friday.

"Wage growth has remained low and strong competition in the retail sector is dampening retail inflation across a broad range of goods."

All-important household spending is still weak, the RBA said, driven mainly by "unusually soft" average earnings growth that was counteracting the improvement in the unemployment rate.

Employment and wages had fallen in the wake of the mining boom but now there are signs of recovery in non-mining investment, the RBA has warned wage growth may not match the improvement in job numbers.

"Shifts in the composition of employment within industries to lower-paid work might partly explain this," the RBA said of the weak average wages growth.

The central bank said the outlook for household income growth remains a significant uncertainty in its efforts to forecast consumption growth.

The Australian dollar fell immediately after the 1130 AEDT release of the November statement but has recovered to be trading at 76.82 US cents at 1414 AEDT, above its 76.79 US cents close on Thursday.

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