Ms Masters pointed to the US, where the unemployment rate was at a 50-year low and there were 1 million more vacancies than people out of work and yet wage growth was only now starting to lift.
In NSW there were 115,000 more people looking for work than available vacancies, in Victoria 98,000 and in Queensland 128,000.
While there were substantial vacancies in some industries, particularly administration, and healthcare, there had to be an investment in skills training to match those out of the workforce with potential jobs.
Ms Masters said low interest rates on their own would fail to get wages climbing if businesses could not find staff.
“Lower interest rates, tax cuts and fiscal stimulus will remain important ways of stimulating the Australian economy for the foreseeable future,” she said.
“However, to kick start meaningful wages growth, we should be looking closely at ways to address the skills gap in this country. Closing the skills gap will be a shot in the arm of personal wages growth and deliver a much-needed productivity dividend to the national economy.”
Just one state or territory, the ACT, has more vacancies than unemployed. It also has the lowest unemployment rate in the country, at 3.4 per cent.
Shadow assistant treasury minister Andrew Leigh said it was clear the jobs market was failing too many Australians.
The Australian Bureau of Statistics reported last week that unemployment was steady at 5.2 per cent through June but the number of people without a job climbed above 711,000.
Dr Leigh said that among some parts of the community, unemployment was much higher.
The jobless rate among those with mental illness was 8 per cent, for those who had not finished year 10 it was 13 per cent and for Indigenous Australians it was 21 per cent.
In NSW and Victoria, the two states with the strongest job market, there are still areas with the unemployment rate around 20 per cent.
The western Sydney areas of Fairfield, Guildford and Emerton all have jobless levels running at 16 per cent and above. Regional areas with high jobless rates include Tamworth west (15 per cent) and Batemans Bay (14.5 per cent).
In the Geelong suburb of Corio unemployment is 21.5 per cent while in the Melbourne suburb of Broadmeadows it is 18.8 per cent.
“The Australian economy is failing 700,000 of our fellow citizens who want a job and can’t find one. Of these, 150,000 have been out of work for more than a year, and 80,000 have been out of work for more than two years,” Dr Leigh said.
“If we got unemployment down from 5.2 per cent to 4 per cent, that would mean 160,000 more people in work.”
Separate figures from the Commonwealth Bank point to some of the challenges facing the RBA and government.
The Commonwealth’s monthly measure of sales, taken from purchases through its EFTPOS system, showed spending was flat in June and at its weakest since February 2017.
The annual growth rate edged down to its slowest in 19 months with people cutting back on discretionary spending such as entertainment.
CommSec economist Ryan Felsman said while cold and wet weather may have discouraged shoppers in June, the upcoming boost from tax and interest rate cuts would help.
“Slow wages growth and elevated mortgage debt are both acting as a restraint on spending, but a boost from the taxman and lower mortgage rates may encourage greater spending,” he said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.