Stagnant wage growth is forcing record number of Aussies into the workforce, including the elderly

• Australia's record workforce participation has been partly explained by the RBA, which has pointed at the increasing entry of women and the elderly into the workforce as the catalyst.

• While improvements in health and workplace flexibility have helped that, another major factor behind the trend is stagnating wages which in turn are turning up the financial stress households are coming under.

• With forecast unemployment and wage growth remaining soft, Indeed Australia Pacific economist Callam Pickering told Business Insider Australia that more interest rate cuts will be needed if the economy doesn't pick up.

---

When it comes to joining the labour force, it's women and the elderly first it seems.

The Australian Bureau of Statistics (ABS) noted last week that the proportion of Aussies working or looking to work -- the participation rate -- had never been higher.

Now, the Reserve Bank of Australia (RBA) has weighed in as to why.

"Over the previous year, there had been a particularly notable increase in the participation rates of women aged between 25 and 54 years and workers aged 65 years and over," it noted in its minutes from its August meeting.

A major reason is rather than retiring at 65, many Australians were just continuing to work instead, offsetting the drop-off that normally occurs in the job market, the RBA said.

It also had some ideas as to why an increasing number of women and older Australians were holding down jobs -- and it's a real mixed bag.

"Some of the factors that could be contributing to these trends, including slow income growth, improvements in health and greater flexibility in the labour market," the RBA said.

With inflation having long-outpaced wages, it's no secret that households are increasingly struggling from the rising cost of living.

That's no doubt helped keep older Australians working longer, and pushed up the number of women working to help alleviate financial stress.

But that's just part of the picture. While economic trends have made it more necessary for Australians to work more, they are also much more capable now of doing so.

Take older Australians who are in better health than their counterparts a few decades ago. As the health of the general population improves, they're more capable than ever of holding down a job past 65 years of age.

The other big one is that workplaces are increasingly aware of the need to be flexible, helping more Australians juggle family and work commitments.

While those last two factors are positive trends, they don't negate the fact that households around the country are doing it tough. What's more, that level of financial stress looks unlikely to improve in the near term.

As a record proportion of Australians work or look for work, more jobs have to be created to force the unemployment rate lower -- a key economic target. That's why despite the economy adding a surprise 41,000 jobs in July, the unemployment rate won't budge from 5.2%.

By the RBA's reckoning, an unemployment level of 4.5% is required to even give proper wages growth a chance. Without that, pay will continue to stagnate and more people have to keep working or looking for jobs to afford rising costs of living.

This negative cycle has created a real pickle for the RBA, the entity charged with keeping the Aussie economy ticking along.

It has forecast that at best we'll get to 5% unemployment and inflation to 2% in the foreseeable future, all going well.

"You look at that forecast and you have to wonder just how much the Reserve Bank's going to have to do in order to really push the economy where it needs to go. It needs to get wages growth up to and above 3%. It need to get inflation back to 2.5% and certainly, another two rate cuts doesn't appear as though it's going to be enough to do that," Callam Pickering, Asia-Pacific economist at jobs site Indeed, told Business Insider Australia.

Unless the federal government changes its mind and starts spending to stimulate the economy, the RBA could be forced to cut interest rates even lower, Pickering said.

For now, the bottom line is the country is going to have to keep working hard for some time yet.