Reserve Bank of Australia and government may disagree on full employement definition

In a White Paper due out on Monday, the government wants to put at the centre of its policy approach a much broader definition of full employment than that used by the central bank.

"The full employment objectives of the RBA and the government are distinct but complementary," the paper says.

While the Reserve Bank defines full employment as the level of joblessness consistent with sustainable wage and price gains, the government says it has "broader and bolder aspirations".

"Everyone who wants a job should be able to find one without searching for too long," the government's policy statement says.

"We want people to be in decent jobs that are secure and fairly paid.

"This objective recognises that the quality of a job and having enough work matters."

Treasurer Jim Chalmers said the government's broader definition of full employment "crystallises our ambition for a dynamic and inclusive labour market in which Australians have the opportunity for secure, well-paid jobs".

The RBA is concerned that the current 3.7 per cent jobless rate is too low and could fuel unsustainable wage growth. It has warned that unemployment will need to rise as part of its efforts to bring inflation down.

New central bank governor Michele Bullock said in June the unemployment rate would likely need to reach around 4.5 per cent in order for labour supply and demand to come into balance and be consistent with price stability.

But several prominent economists think that is wrong and a jobless rate of between 3.5 and 4 per cent could be sustained without adding to inflation.

Dr Chalmers said that while such technical debates were useful, the White Paper sets out a much more ambitious approach to full employment.

The government's policy paper says the concept of a non accelerating inflation rate of unemployment was useful in preparing forecasts or informing economic policy "but it does not capture the full potential of our workforce".

It says there are 2.8 million people who want a job or to work more than they do, and the government wants a broad suite of measures to gauge the extent of such underutilisation and track progress toward reducing it.

"The White Paper helps us better understand what full employment looks like in practice and the kinds of policies we need," Dr Chalmers said.

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Meanwhile, he said the possibility that Ms Bullock will chair two boards - one to set monetary policy, the other to oversee operations - is among several "line ball calls" about the future of the RBA yet to be made.

Uncertainty hangs over key aspects of how the Reserve Bank, one of the nation's major economic institutions, will be structured and operate with several important decisions yet to be resolved, including around the obligations, responsibilities and authority of the governor, the deputy governor and the newly-created chief operating officer position.

Though the government has accepted in principle the recommendations of its RBA Review, how some of these are to be implemented has yet to be finalised.

One of the most controversial is whether the RBA governor should be chair of both the yet-to-be-established monetary policy committee that will include several external experts, and the governance committee.

Former governor Ian Macfarlane has raised concerns about the changes, arguing they could rob the RBA governor of a lot of their authority and hand it to "part-timers".

"If you consider a governor appearing before the public or appearing before the parliamentary inquiry or something, and being asked for a very frank statement about what the priorities for monetary policy were, they would be in a very difficult position. If they didn't know what was going to happen at the next meeting," he told the 7.30 Report.

But Dr Chalmers dismissed such concerns, arguing that the current board already included a majority of people from outside the Reserve Bank.

"That's the situation that has existed for a long time so he's wrong to say that that's a radical change," he said.

"Whether or not the governor chairs the governance board is one of those line ball calls," Dr Chalmers said, adding that he had consulted extensively on the matter, including with his opposition counterpart Angus Taylor.

"Angus Taylor and I have our differences across a range of areas but we've had some very good discussions ... about these issues," he said.

Mr Taylor said the Coalition was "constructively engaging with the government" on the implementation of the RBA review.

"It is important transition arrangements, including the appointment of the [RBA] deputy governor and board members, be handled in a bipartisan manner," he said.

The government has yet to appoint the deputy governor and the treasurer told ABC radio so far he had interviewed three candidates for the role.

Dr Chalmers said it was a high-quality field" and the government will make its choice "before long".