Treasurer Jim Chalmers has denied that Labor’s forthcoming employment white paper was in conflict with the Reserve Bank of Australia’s (RBA) unemployment rate target.
Mr. Chalmers said the aim of the white paper was to get the unemployment rate as low as possible, but without setting a specific statistical target like the RBA’s non-accelerating inflation rate of unemployment (NAIRU) of 4.5 percent.
“We’ve seen [the unemployment rate] come down in recent years … we want to get unemployment as low as we can, we want inflation moderate—those are our objectives,” he told Sky News Australia on Sept. 24.
It comes after RBA Governor Michele Bullock faced criticism from union leaders in June when she said that “unemployment will have to rise” to 4.5 percent as a measure to rein in inflation.
This means the RBA’s technical definition of full employment is 4.5 percent to keep inflation at bay. With the current jobless rate at 3.7 percent, Australia is currently beyond full employment by the RBA’s definition.
On Sept. 22, Mr. Chalmers told the press, “It’s possible to have a narrow, technical assumption about full employment which feeds the forecasts of the Reserve Bank and the Treasury and others,” in reference to the RBA’s definition of full employment.
“But what I’ve tried to do is to say that that is very different from the government’s objective, the government’s aspiration,” he added.
Goals Aligned
NAIRU represents the lowest level of unemployment that can be maintained without triggering an increase in both wage growth and inflation, and this is the metric the RBA uses to calculate the full employment rate.A higher unemployment rate tends to lower demand for goods and services in the economy, which in turn reduces inflationary pressures and enables inflation to fall within the RBA’s target of 2-3 percent inflation.
The RBA is able increase interest rates to drive down inflation through decreasing demand in the economy. However, it is at the detriment of unemployment which tends to rise.
Employment White Paper
The employment white paper represents the culmination of a year’s worth of work that followed a jobs and skills summit in 2022.The initial objectives of the white paper are expected to include the goals of achieving consistent and all-encompassing full employment, as well as an ambitious vision of full employment compared to that of the RBA.
This includes initiatives for older Australians and women, such as childcare subsidies and enhanced parental leave, and measures to address gender equality and wage disparities.
Other initiatives and policies expected to be outlined in the paper include the recent announcement of the National Skills Passport, which aims to connect workers to employers and for which $9.1 million has already been committed.
Ensuring that workers secure sufficient working hours and facilitating the reintegration of individuals who have abandoned their job search into the labor force will constitute crucial elements of the federal government’s employment strategy.
“This is all about making sure that our labour market is as dynamic and as inclusive as it can be. We want to make sure that there are more jobs and more opportunities for more people in more parts of the country—and that’s what the Employment White Paper is all about,” Mr. Chalmers told the press on Sept. 20.
“Our labour market has proven to be really resilient but we’re not resting on our laurels. This is all about the labour market that we need for the future so that our people can grab the opportunities of an economy like ours.”
