Chalmers won’t back unions on RBA’s employment target

Jim Chalmers would not back union claims it was possible to contain inflation without unemployment increasing.

Treasurer Jim Chalmers. Picture: NCA NewsWire/Martin Ollman

Jim Chalmers would not back union claims that it was possible to contain inflation without unemployment increasing, as he warned that “worrying signs” from the Chinese economy were likely to impact Australia.

With unions demanding incoming Reserve Bank governor Michele Bullock reset the central bank’s 4.5 per cent unemployment target, the Treasurer said it “remains to be seen” if inflation could be brought under control with higher levels of employment.

He said there was “obviously a debate among economists what full employment is, whether it’s around 4.5 (per cent) or a little bit lower than that”.

“That’s been a more or less a perennial feature of the economic conversation for as long as I can remember,” Dr Chalmers told ABC’s Insiders on Sunday.

He said it was “relatively uncontro­versial” for Ms Bullock to say in a speech in June that unemployment needed to increase from 3.6 per cent to 4.5 per cent to bring inflation down.

The speech was attacked by leaders of major unions, with the ACTU leading calls on Friday for the 4.5 per cent “full employment” target to be jettisoned.

“The Reserve Bank forecasts and Treasury forecasts have inflation moderating over the coming months; they do have a tick up in unemployment as well,” Dr Chalmers said.

“The challenges in our economy are substantial – global and domestic. The slowdown in our economy is expected in those forecasts to be significant, and that will have implications for the unemployment rate.”

Dr Chalmers said the government and the RBA wanted to see “as many people in jobs as we can” but the most pressing issue for the economy was inflation.

“We’ve got to get on top of this inflation challenge, which is the primary challenge in our economy,” he said.

Australian Workers Union secretary Paul Farrow – the union of Dr Chalmers – said the RBA should redefine full employment as being “understood as zero involuntary unemployment”.

The Treasurer would not be drawn over whether Ms Bullock, the RBA’s deputy chair, would bring a different approach to interest rates from outgoing governor Philip Lowe.

“I’m not going to … pre-empt the decisions Michele Bullock might recommend to the board. I think that’s really important,” he said.

Incoming Reserve Bank of Australia governor Michele Bullock. Picture: Reserve Bank of Australia/AFP

Dr Chalmers paved the way for a tighter budget strategy if inflation remains relatively high early next year but he also said the government would consider further cost-of-living measures if needed.

“If down the track we need to do something differently, or we need to do something extra, of course we (would) contemplate that down the track,” he said.

“But right now we are rolling out what people would consider to be a textbook fiscal policy in the circumstances we confront.”

Dr Chalmers warned that the weak economic data coming out of China would have an impact on Australia.

“There have been some developments out of China that we are monitoring incredibly closely.” he said.

“The global economy is in a pretty precarious place right now.

“It is having implications here and combined with what we’re seeing from the impact of these rate rises, it is one of the reasons why we do expect the Australian economy to slow considerably.”

Deputy Liberal leader Sussan Ley said the government was not doing enough to tackle the cost of living.

“They’re talking about cost-of-living relief but it’s actually not a reality,” Ms Ley said.

“It’s not happening in families’ budgets. It’s not happening in the national budget.

“The problem is we need a plan to sustainably bring the cost of energy down because if you aren’t locking in that support, you aren’t actually doing your job.”