* Q1 wage price index up 0.5 pct, in-line with forecasts
* Annual wage growth stood unchanged at 1.9 pct
* Annual pay hike in private sector 1.8 pct; 2.4 pct in public
By Swati Pandey
SYDNEY, May 17 (Reuters) - Australian wages are rising at their slowest pace on record at a time when household debt has climbed to an all-time peak, putting a lid on spending and a drag on the course of inflation.
The Australian Bureau of Statistics (ABS) said on Wednesday that its wage price index rose just 0.5 percent in Jan-March, matching forecasts and compared with a similar reading the previous quarter.
Annual wage growth held at 1.9 percent, the lowest on record. That was less than half the wage growth rate workers enjoyed a decade ago when a mining boom boosted pay across Australia.
The slowdown has contributed to an unwelcome decline in underlying inflation, which is below the Reserve Bank of Australia's (RBA) target band of 2-3 percent and has led to two interest rates cuts last year to a record low of 1.5 percent.
The central bank is worried about surging household debt alongside skyrocketing property prices at a time when income growth has slowed.
Households burdened by heavy mortgage debt have a reduced appetite for consumption, making the transmission of monetary policy weaker, RBA Governor Philip Lowe said earlier this month. central bank has argued that wage growth has finally bottomed, with its liaison with firms suggesting the constant downward pressure on labour costs was easing. It also expects underlying inflation to pick up by early 2018.
It sees wages rising gradually in line with an improvement in the jobs market and the end of the drag on growth from a slump in mining investment.
Yet there was scant sign of a pick-up in Wednesday's report. Not a single industry from manufacturing to healthcare raised wages more than 2.3 percent annually. Even mining has lost its Midas touch, with workers getting an annual rise of only 0.6 percent.
Wage hikes were more attractive in the public sector at 2.4 percent compared with 1.8 percent in the private sector.