A longer run perspective on Australian unemployment

Abstract

Unemployment has been at unacceptable levels for at least twenty-five years and is probably Australia’s most serious economic and social problem. Emphasising the economics of the unemployment problem and focussing mainly on the labour market, a historical approach was used which viewed unemployment as consisting of two parts: a cyclical component and an underlying component, divided into three historical periods: 1950 to the early-mid 1970s; early-mid 1970s to the early 1980s and early 1980s to the present. The paper addressed: the unemployment response to labour market deregulation policies over the last decade; new policy ideas to reduce unemployment; the unemployment cycle and the current and near future unemployment situation. The conclusions reached were: that labour productivity growth has increased but this has increased real wages; policies tor educe unemployment over the last decade in general have so far not been successful nor is it expected that currently proposed new policy ideas will be able to substantially reduce unemployment. It is also unlikely that avoidance of a recession will be sufficient to achieve a sustained and significant reduction in unemployment. This is particularly the case if there is not mechanism for real wage moderation and if labour supply reductions cease to be important.