On Friday a small but significant shift occurred in the Australian economic firmament. While appearing before the house economics committee, the governor of the Reserve Bank, Philip Lowe, announced that he believed the non-accelerating inflation rate of unemployment (Nairu) had a 4 in front of it.

The Nairu is a fairly economic wonky term for what is otherwise referred to either as the natural rate of unemployment or full employment. The reason why it is now mostly referred to as the Nairu is because terms like natural rate or full employment suggest a finality which most politicians or policy makers would not wish to subscribe.

What it essentially refers to is the level unemployment can reach before inflation starts rising – and rising at an accelerated rate.

It is not a fixed level. A recent study by the RBA had the Nairu around 6% during the 1980s, a bit higher in the 1990s, before falling steadily during the mining boom, and falling again after the GFC until in 2017 is was considered to be around 5%.

If we look at the period from 1992, when we came out of the recession, until 2008, when the GFC hit, we can see that as unemployment fell from 11% in 1992 to 5% in 2005, inflation growth remained largely within the 2% to 3% range.

But once it went below 5%, inflation growth began to speed up, and when unemployment hit 4.2% in June 2007 we saw a sharp rise – almost like we had hit a wall:

This is why the Nairu was considered to be around 5% – once it went below that, wages growth rise and then so too would inflation until it reached a point where it seems to take off – as it did in 2007.

But on Friday Lowe told the house economics committee that “I think this country can have an unemployment rate close to 4½ per cent without wage growth causing problems for inflation.”

This has big implications for economic policy.

Right now we have unemployment of 5.1%. If 5% were considered the Nairu, then that means you believe that were unemployment to go any lower than it is now, inflation is going to become an issue. And that suggests that maybe the RBA needs to think about raising interest rates to take some heat out of the economy.

But plainly there is no heat in the economy,

On Monday the latest figures for production prices were released showing that domestic demand in the past year grew at just 1.75%, and meant that in the past seven years just two quarters have seen growth above 2% (compared to a pre-2012 average of 3.6%):

On Wednesday the latest construction figures showed a decline in the volume of work done in the March quarter – and signalled a sharp fall in the level of public sector work being done:

And similarly the growth of new residential building work being down is well down of what is was during the peak housing boom period in Sydney of 2016:

Clearly the Reserve Bank knows that there is little heat in the economy because for five years now it has set the cash rate either just on or actually below the level of inflation – a situation usually reserved for emergency periods of stimulus such as during the GFC:

Despite the RBA having its foot very firmly on the economy accelerator, inflation growth remains lacking.

When we compare the unemployment rate with inflation growth over the past eight years we see that even as we approach 5% unemployment there is no sign of accelerating inflation:

Consider that there have only been 12 quarters where our unemployment rate has been either 5.0% or 5.1% (in 2004-06, 2010-12 and December 2018), and in all previous times the underlying inflation rate was usually nearing 3%; now it is just 1.8%:

What does this mean? Well, firstly forget any interest rate increase any time soon. Clearly the RBA believes until unemployment is consistently below 5% there is little need to worry about inflation.

It also means, given wages growth generally rises with inflation, the RBA (without saying it explicitly) does not see wages about to start growing faster – certainly nowhere above 3% - until unemployment gets closer to 4.5%.

But when you consider that over the past three years the construction industry has been one of the key sectors for job growth and it now looks to be slowing quite drastically, that does not bode well for unemployment continuing to fall at all.

And if it doesn’t fall, not only is talk about the Nairu moot, so too are hopes of our wages growth improving.

• Greg Jericho is a Guardian Australia columnist