‘Unemployment is too low’: RBA deputy stirs up union anger

  • Published June 21, 2023

The Australian, 21 June 2023

Reserve Bank deputy governor Michele Bullock says unemployment is too low and “will have to rise” to bring inflation under control, sparking an outraged ­response from powerful union ­officials that will pile pressure on Jim Chalmers to pursue a more far-reaching overhaul of the independent central bank.

Union leaders from the CFMEU, Electrical Trades Union, Australian Workers Union and Health Services Union branded Ms Bullock’s comments as “shameful” and blasted a “busted system” that was putting tens of thousands of livelihoods at risk.

The intervention from the ­unions – which together hold a large number of votes at Labor’s upcoming national conference that will vote on the federal party’s policy platform – indicates that the 4.5 per cent “full employment” target of the RBA has become a growing point of contention in the ­labour movement.

The Treasurer, a member of the AWU, in April installed two former ACTU representatives on the bank’s board, and the government has flagged making employment goals a larger part of the RBA’s mandate.

On Tuesday, Ms Bullock ­argued the jobless rate of 3.6 per cent was too low and it would have to rise to about 4.5 per cent over the coming 12 months in order to return inflation sustainably back to the central bank’s 2-3 per cent target range over time.

Ms Bullock warned that a “deep and long-lasting recession would be likely” if inflation was allowed to get out of hand, and that this would “mean a substantial rise in the unemployment rate”.

“We are aiming to bring inflation back to target (over a) slightly longer period than other countries overseas, and in many ways it might be much easier just to jack up interest rates,” Ms Bullock said.

“So we are hoping that we can bring inflation down a bit more gradually … (but) the unemployment rate will have to rise.”

CFMEU national secretary Zach Smith said workers had been “pummelled by the RBA with a dozen rate rises, yet it seems this out-of-touch hotbed of neoliberal economics isn’t finished (in) its quest to dish out more pain”.

“For a top central banker to suggest unemployment needs to rise is shameful,” Mr Smith said

“Why is it always working people who need to pay when we know corporate profits are fuelling this inflationary storm?

“These aren’t just numbers on a page. What we’re talking about here is tens of thousands of livelihoods at risk from this irresponsible economic approach.”

Electrical Trades Union acting national secretary Michael Wright said it “appears there is no problem for which the Reserve Bank does not think working class misery is the solution”.

“Either we pay through higher interest rates, lower wages or lost jobs,” Mr Wright said. “It would be really refreshing to see the Reserve Bank propose a policy that didn’t ask Australia’s poorest to take it in the teeth.”

Australian Workers’ Union acting national secretary Stacey Schinnerl said workers did not cause the inflation crisis “yet every solution the RBA suggests involves hurting working people”.

“It’s a truly broken system when the RBA’s message to struggling Australians is: some of you need to lose your jobs or we’ll have to smash all of you with interest rate hikes,” she said.

“It’s a busted system in need of a complete overhaul.”

Health Services Union national president Gerard Hayes said the RBA “needs to realise that when someone is constipated there is often a lag before the treatment works”.

“If you keep taking laxatives you end up with a very messy situation. We can surely do better than this when it comes to jobs and livelihoods,” he said.

Dr Chalmers would not be drawn on whether a weaker labour market was the necessary price to pay for taming inflation.

“We have expected for some time that the unemployment rate will tick up a bit, as a consequence of higher prices and rising interest rates combined with some pretty serious global uncertainty,” the Treasurer said.

Ai Group chief executive Innes Willox said Ms Bullock’s comments were uncontroversial, and that there was already evidence that employers were reconsidering their hiring plans.

“Economic history tells you that this is the way it has to play out,” Mr Willox said, noting that a jobless rate of 4.5 per cent would still be a relatively good outcome.

“We are already seeing data and hearing anecdotally that businesses are looking more and more at their workforces as they try to juggle what for some sectors is sharply slowing demand, driven by consumers,” he said.

Union delegates will be able to move motions to amend Labor’s policy platform at national conference, which would bind Anthony Albanese in the next term of parliament.

The draft platform supports an independent RBA and its inflation-targeting framework.

“Labor believes full employment should continue to be a core objective for monetary policy, alongside price stability,” the draft platform states.

A key recommendation from the review into the RBA was that it must give “equal consideration” to labour market goals and controlling inflation when making ­interest rate calls, suggesting policymakers were not paying sufficient attention to one half of its two mandated objectives.