Labor and RBA in lock-step on full employment, Chalmers says

The Treasurer has rejected claims that the government’s ambitious target of ‘a job for everyone who wants one’ could complicate the Reserve Bank’s battle to contain inflation.

Treasurer Jim Chalmers. Picture: NCA NewsWire/ Linda Higginson

Jim Chalmers says Labor and the Reserve Bank’s full employment goals are “not at odds’, rejecting claims the government’s jobs target could complicate the central bank’s battle to contain inflation.

The Treasurer, in an opinion piece in The Australian, said last week’s employment white paper was aimed at reducing structural barriers to work, which would allow the economy to run at higher levels of employment without the need to raise rates.

Some economists and business groups say Dr Chalmers’ goal of “a good, secure, fairly paid job for everyone who wants one” must remain distinct from the RBA’s definition of the non-accelerating inflation rate of unemployment, or NAIRU, which is estimated at 4.5 per cent – well above the jobless rate of 3.7 per cent.

Unions attacked governor Michele Bullock for a statement in June that unemployment “will have to rise” to the mid-4s in order to bring inflation back to the 2-3 per cent target by late 2025.

Dr Chalmers said the NAIRU was “a necessary and important but also a narrow and technical way to look at the labour market”, and it “informs and complements the government’s broader and longer-term goal to create an economy where everyone who wants a job can find one without having to search for too long”.

“We don’t see the NAIRU as set in stone … we want to drive it down over time – by reducing the structural barriers to work. That’s why we’ve adopted twin goals of sustained and inclusive full employment,” he said.

“A short-term focus on sustained full employment does not and should not come at the expense of the longer-term and more ambitious objective of expanding opportunities in our labour market to more people.

“These twin goals do not put us at odds with the Reserve Bank, as some commentators have wrongly concluded – in fact I consulted the governor on this approach and she has publicly and repeatedly backed it in.”

Despite unemployment at a near 50-year low, Dr Chalmers said there were about three million people, or about one-fifth of the workforce, who wanted a job or were looking to get more hours.

“We know the unemployment rate, as important as it will always be, doesn’t always tell the full story of underutilisation and under­employment in our economy, or the distribution of opportunity in our society,” he said.

“It doesn’t always capture the differences and complexities of frictional, cyclical and structural factors at play in our labour market. There is still considerable untapped potential,” he said.

While employers welcomed the drive to increase the share of Australians participating in the workforce, they have also raised alarms over Labor’s industrial relations reforms, including the reintroduction of multi-employer bargaining, which companies believe will reduce workforce flexibility and undermine the white paper’s goals of creating a more efficient labour market.

Dr Chalmers said “we are taking comprehensive action, including improved education, migra­tion and regional planning systems … We are equipping the workforce with skills needed for the jobs of the future, enhancing the ability of individuals and businesses to adapt to the modern labour market, and breaking down barriers affecting people’s ability to participate.”

The ACTU has pushed for the RBA to target a zero rate of unemployment, which some economists believe would “blow up the economy” by returning the country to the wages ­spirals and boom-bust cycles of the 1970s and ’80s.

Challenger chief economist Jonathan Kearns told The Australian “it would be problematic to have a very specific numerical target in the statement on the conduct on monetary policy”.