Treasurer Jim Chalmers has flagged the federal government wants to hold the unemployment rate down at historically low levels, potentially putting it at odds with the central bank. In a significant intervention in the full employment debate, Dr Chalmers said the government wanted to push the sustainable rate of unemployment lower than current Reserve Bank of Australia and Treasury estimates of around 4.5 per cent. "While it's a useful measure ... it shouldn't - and doesn't - limit the government's ambitions for getting more Australians into work," the treasurer wrote in the Australian Financial Review. "We can improve the level of full employment that our economy can sustain, pushing the statistical measure lower and increasing the speed limit on our economy." In June, incoming Reserve Bank governor Michele Bullock said the central bank's goal was to return the jobless rate to 4.5 per cent by late 2024, which it thinks would be the point at which "there is a balance between demand and supply in the labour market". "While 4.5 per cent is higher than the current rate, this outcome would still leave us below where it was pre-pandemic and ... the economy would be closer to a sustainable balance point," Ms Bullock said. The senior RBA official admitted there was uncertainty about what level of unemployment that equated to full employment, often expressed as the non-accelerating inflation rate of unemployment (NAIRU), but 4.5 per cent was "not far off" estimates of where it might currently be. But Deloitte Access Economics partner Stephen Smith has heavily criticised the central bank's goal of pushing unemployment higher. "[It's] narrow, dogmatic view of the link between unemployment and inflation fails to recognise the key sources of excessive inflation in Australia at present, and therefore misdiagnoses the correct policy response," Mr Smith said. He argues the June quarter inflation data released on Wednesday provided further evidence that the RBA has already increased interest rates too far. While not commenting directly on the Reserve Bank or its conduct of monetary policy, Dr Chalmers said there was "a big difference between a technical assumption that feeds a forecast" and the government's aspiration to get more people into work. READ MORE: Flagging that the government's intent is to "create an economy where anyone who wants a job can get a job", Dr Chalmers said the first priority of the forthcoming Employment White Paper would be to articulate the government's full employment objective. The Treasurer said that although the NAIRU measure was useful, "it doesn't capture the full potential of our workforce". Dr Chalmers said there was much that could be done to tackle structural issues that cause unemployment, including improving access to training, affordable childcare and housing. "If we succeed in reducing these structural sources of unemployment, we can improve the level of full employment that our economy can sustain," he said. "That's why we need to have much bolder and broader aspirations for employment outcomes. "Even with a jobless rate at 3.5 per cent, there's still a much bigger story to tell about the capacity and potential of the labour market in our changing economy."
