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ACTU secretary Sally McManus says the RBA needs to look at the drivers of inflation with “fresh eyes”.Credit:Dominic Lorrimer

Economists have said the remarks are largely uncontroversial and Bullock noted at the time that a 4.5 per cent unemployment rate would still be lower than pre-pandemic levels.

However,Australian Council of Trade Unions secretary Sally McManus said the central bank had tolerated the unemployment rate at too high a level in the past,and that the drivers of inflation needed to be properly identified.

“Forcing up unemployment is not the answer,” McManus said on Sunday.

Asked whether he agreed with Bullock’s remarks,Chalmers on Sunday said he uses “different words to describe it” but defended the incoming RBA chief.

“The point that Michele Bullock was making in that speech – which I think is relatively uncontroversial – is that as the Reserve Bank forecasts and the Treasury forecasts have inflation moderating over the coming months,they do have a tick-up in unemployment as well,and I’ve been upfront about that.”

Incoming RBA Governor Michele Bullock was appointed to the role on Friday.Credit:AAP

Bullock’s appointment prompted McManus to urge her to “consider the realities of the Australian economy with fresh eyes”,following unions’ sustained criticism of Lowe’s rhetoric on wages amid successive interest-rate rises.

Mortgage holders are grappling with the effects of a 4.1 per cent cash rate,while monthly inflation sits at 5.6 per cent.

McManus argued the RBA needed to recognise the role of corporate profits,rather than employee costs,in driving up inflation,citing Organisation for Economic Cooperation and Development research published last month.

Asked byInsiders host David Speers whether it was possible to get inflation back to the RBA’s target zone without driving unemployment higher,Chalmers said that “remains to be seen”.

He also said there was a debate among economists about what constituted full employment,including “whether it’s around 4.5 per cent or a little bit lower than that”.

“That’s been more or less a perennial feature of the economic conversation for as long as I can remember,” he said.

The Coalition is using its weekendFadden byelection win to capitalise on angst over cost-of-living – the number-one issue for voters in the Gold Coast seat.

Deputy Liberal leader Sussan Ley is embarking on a tour of Labor ministers’ electorates over the coming days,including Chalmers’ Queensland seat of Rankin,to attack the government’s economic credentials.

Ai Group chief executive Innes Willox agreed there was nothing controversial about Bullock’s remarks. “There is an unfortunate price to pay when inflation moves too high,” he said,adding businesses were warning to expect more job losses in coming months.

Independent economist Chris Richardson said there was no “magic wand” to fight inflation that didn’t cause the unemployment rate to rise. However,he believed inflation would be tempered before the unemployment rate reached 4.5 per cent.

Stephen Koukoulas,a former economic adviser to former Labor prime minister Kevin Rudd,said it was a harsh reality that tens of thousands of job losses was “the price you have to pay” to help cool the economy.

Chalmers and Lowe on Sunday flew to India to attend a G20 gathering meeting where the effect of China’s weakening economy on Australia’s slowdown will be discussed.

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