Chalmers questions Bullock over 5% unemployment proposal

• Treasurer Jim Chalmers rejected Reserve Bank of Australia governor Michele Bullock’s suggestion that unemployment may need to reach 5%.
• Markets expect the central bank to raise the cash rate to 4.6% following persistent underlying price pressures.
• The government aims to balance inflation reduction with low unemployment under the RBA's dual mandate.

Treasurer Jim Chalmers has publicly questioned Reserve Bank of Australia Governor Michele Bullock after she suggested that the national unemployment rate may need to rise to 5% to control inflation.

The disagreement comes as trimmed mean inflation has accelerated from a mid-2025 low of 2.8%, contrasting with Treasury estimates that full employment can coexist with moderating price growth.

“I think between 4.5% and 5% will probably take enough heat out of the labour market that it’ll ease pressure on inflation,” said Reserve Bank of Australia Governor Michele Bullock.

The central bank previously forecast the jobless rate to rise to 4.8% by 2028, but recent official statements indicate that tighter monetary settings may be required to curb domestic demand.

The central bank estimates that Australia's non-accelerating inflation rate of unemployment sits between 4.5% and 5%, whereas Treasury models suggest the threshold could be as low as 4.25%.

RBA officials have increasingly signalled a hawkish stance ahead of their upcoming policy meeting, explicitly prioritising inflation containment over maintaining recent employment gains.