Chalmers’ core Reserve Bank of Australia objective a win for unions

Treasurer Jim Chalmers says ‘workers do deserve a voice around the Reserve Bank table’. Picture: NCA Newswire

Jim Chalmers has delivered a big win for trade unions after pledging to enshrine full employment as a core Reserve Bank of Australia objective in determining monetary policy settings.

Under the biggest shake-up of the central bank since the early 1990s, Chalmers has backed a new RBA mandate giving equal weight to labour market conditions and keeping inflation between 2 to 3 per cent.

As a longtime critic of the RBA, the ACTU has championed the need for the central bank to expand its decision-making to support both short and long-term employment.

In a major change to the RBA’s charter, the 282-page review recommends “if inflation is above target and employment below target following a supply disruption, the RBA can seek to return inflation to target more gradually than otherwise to achieve better employment outcomes”.

“Equal consideration should be given to price stability and full employment in making such judgments,” the review said.

Despite the unemployment rate being at historically low levels, ACTU secretary Sally McManus said “it’s time for the RBA to rebalance its efforts towards achieving its objective of full employment, and away from … higher interest rates”.

The appointments of former Fair Work Commission president Iain Ross and Slater & Gordon non-executive director Elana Rubin, who previously held senior ACTU roles, to five-year terms on the RBA board was strongly endorsed by McManus. While Bob Hawke and Bill Kelty sat on the RBA board as ACTU president and secretary, Chalmers has been careful not to appoint active union officials.

“I certainly intend to make sure that the interests of workers are front and centre. I think that workers do deserve a voice around the Reserve Bank table,” Chalmers said.

Implementing the RBA review, promised by Chalmers before last year’s federal election, has been universally backed as critical to modernising the central bank and bringing it line with global best practice.

RBA governor Philip Lowe, a lightning rod for criticism over the central bank’s rosy pandemic-era forecasts that left households struggling to service their mortgages, is preparing to exit the role when his seven-year term ends on September 17.

With the Australian economy faring better than most western nations, a defiant Lowe on Thursday downplayed the review’s recommendations because they won’t “fundamentally change how the economy works”.

“We’re not suddenly going to deliver 2.5 per cent inflation every year. It’s an improvement but we’ve got to be realistic here,” Lowe said.

By mid-year, Chalmers and Anthony Albanese will appoint Lowe’s successor and task them with delivering the review’s 51 recommendations. The exhaustive reform road map gives the government some political cover, with inflation expected to stay higher for longer and keep interest rates at elevated levels.

Peter Dutton, who has come under attack from Albanese for opposing government legislation and policy, offered an olive branch on Thursday. The Opposition Leader and his treasury spokesman Angus Taylor, who had direct input into the review and was consulted by Chalmers, understand the importance of bipartisanship on generational reforms that will modernise the RBA.

However, Dutton issued a clear warning to Albanese and Chalmers on “political interference”.

“The thought of union bosses with links into the Labor Party making decisions about people’s mortgages rates would cause most people some distress, so we need to make sure there are proper safeguards that it is an independent process.”