As the Australian economy enters the fifteenth year of its current economic cycle, the goal of full employment remains one of the most elusive for Australian policymakers. Despite the downward trend in the unemployment rate throughout the past decade, the government still faces many structural impediments in the labour market that prevent it from achieving its full employment objective. These difficulties can only be overcome by using a combination of macro and micro policy.
Unemployment refers to the situation where there is an underutilization of labour within the economy leading to total production levels below their maximum potential. The government will seek to decrease unemployment in an economy because of the economic opportunity of f the unused labour, as well as the negative social impact on the community of unemployment, such as increased poverty and reduced living standards. Over the past decade Australia’s labour market has been characterized by two broad trends. The first of these is the downward trend in the unemployment rate, from highs of 10.7% in 91-92 to 4.9% in August 2006. this substantial reduction in the unemployment rate is a reflection of the decrease in cyclical unemployment. cyclical unemployment refers to those persons who have become unemployed due to a downturn in the business cycle. This decrease has been owning to Australia’s strong economic growth throughout the 1990s and into the 2000s. it is believed that any further reductions in unemployment will have to be brought about by structural reforms to the economy as this rate of unemployment is very close to the Australia’s estimated NAIRU. The second trend within Australia’s labour market has been the persistence of structural problems. The most significant of these is the high level of structural unemployment, estimated by the OECD in March 2003 to make up approximately 5.5% of the labour force. Australia’s unemployment rate is now below this estimate, suggesting that...
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