Reserve Bank governor Philip Lowe says wage growth needs to increase to help the Australian economy become more resilient to issues of burgeoning household debt.

“The resilience of our economy would be enhanced by an extended period in which housing prices and debt outstanding increased no faster than our incomes,” Dr Lowe said in a keynote address to the Economic Society in Brisbane.

Dr Lowe said that in 2002, 12 per cent of households had debt that was over three times their income.

This figure was up to 20 per cent of households by 2014, and there has been a substantial increase in households with even higher debt loads as well.

Wage growth remains stuck at its historic lows of just over 2 per cent a year.

Dr Lowe said the RBA has identified that Australia’s fragile household balance sheets could suffer when interest rates start heading up.

“When the interest rate cycle turns and rates begin to rise, the higher debt levels are likely to make spending more responsive to interest rates than was the case in the past,” Dr Lowe said.

“Double-digit growth in debt owed by investors at a time of weak income growth cannot be strengthening the resilience of our economy, nor can a high concentration of interest-only loans,” he noted.

He predicted that people would begin to realise they have borrowed too much and rapidly adjust their spending, which could have an impact that would have on the broader economy.

“This could prompt a sharp contraction in their spending, as they try to get their balance sheets back into better shape,” he warned.

“An otherwise manageable downturn could be turned into something more serious.”

Commonwealth Bank economist Gareth Aird said the governor did not mention the current problem with economic resilience from record low interest rates.

“A cash rate sitting at a record low of 1.5 per cent is partly what makes us 'less resilient to future shocks' because there isn't much left in the rate cut chamber,” Mr Aird said.

“Therefore our less resilient situation is not just down to the record level of household debt relative to income, it is also due to the fact that the cash rate is at a record low and can probably only go down another 75 basis points if required.”