Philip-Lowe
Reserve Bank governor Philip Lowe (Image: AAP/Joel Carrett)

Federal and NSW government decisions to curb public sector wage growth will frustrate the Reserve Bank of Australia's (RBA) attempts to support the economy through the worst recession in 90 years. The move will leave over 600,000 people and their families worse off over time and impact income tax and GST inflows.

The Morrison government has effectively cut wage rises for over 240,000 Commonwealth public servants to just above zero (at the moment) by linking them to private sector wage growth. The Coalition government in NSW is doing something similar by cutting the wage increase cap from 2.5% to 1.5% for its almost 400,000 public servants.

Between the two governments the move covers around 5% of the Australian labour force.