Walker Hill Group

Lower Unemployment and Higher Wages for Australians Could be New Reality

“These are our goals and we are committed to achieving them”: Lower unemployment, higher wages are Reserve Bank Governor’s objective.”

It hasn’t been seen since the 1970s, but the Reserve Bank has a new aim- one that could see the average Australian’s pay packets dramatically increase.

RBA boss Philip Lowe stated that he is now aiming to get Australia to “full employment”, telling news.com.au that unemployment could drop from its current levels of 6.4 percent to around 4 percent – maybe even lower. Governor Lowe’s plan involves increasing both employment and wages- a major change from previous RBA Governor, Glenn Stevens, who rarely spoke of full employment and its implications.

Stating that the central bank would now focus on employment rather than inflation, the shift means that Lowe and the RBA will be concentrating on labour market conditions, including wage growth and under-employment, rather than on the rise and fall of prices across the economy.

Lowe assures that this does not mean the bank is abandoning its inflation target. “We want to see a return to full employment in Australia and inflation sustainably within the 2 to 3 percent target range,” he explained, maintaining that the best way to increase inflation was through reducing unemployment.

“If this can be done, we will get closer to full employment and the inflation target and enhance the economic welfare of the Australian people,” he said.

The last time Australia had truly low unemployment rates was in the 1970s.

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