RBA Governor Sees Higher Unemployment as Key to Taming Inflation

Reserve Bank of Australia (RBA) Governor Michele Bullock believes that the country's unemployment rate needs to edge higher to help bring inflation back under control. The current 4.5% jobless rate is at the lower limit of what the RBA thinks will bring down inflation to an acceptable level, Bullock said.

The RBA wants to avoid high unemployment but sees the labor market as too tight and inflation as too high. 'There are certain levels of unemployment that if you go below that level of unemployment, it introduces a lot of pressure in the labor market, and that can put upward pressure on wages and prices,' Bullock explained.

Bullock suggested that an unemployment rate between 4.5% and 5% would 'probably take enough heat out of the labor market that it'll ease pressure on inflation.' Money markets and economists at all four big banks already expect the central bank to hike interest rates in September for a fourth time in 2026.