Unemployment in Australia

This report analyzes the issue of unemployment in Australia, exploring its causes, effects on the economy and society, and the government policies implemented to address it. It examines both demand-side and supply-side policies, including fiscal and monetary measures, and discusses the impact of long-term unemployment on individual well-being and national productivity.

Unemployment

EXECUTIVE SUMMARY
In Australia unemployment is one of the most vital issue that it is presently facing.
Unemployment rate in Australia have raised to 5.4 percent and about 14,000 jobs have
disappeared. In this report, unemployment issue in the nation for last 10 years is been examined
and its effects on country's economy is been studied. Due to various factors like innovative
technology or fully automation in various industry people are losing jobs. As unemployment
issue have increased in nation it has severe impact on its economy. Such as overall spending in
the economy would reduce and people would take loans or credit for their daily necessity.
Aggregate demand and economic growth rate can be raised with the help of government fiscal
policies for reducing unemployment within Australia.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Unemployment rate in Australia have risen from 4.2 percent in 2008 to 5.4 percent in
2018. Overall of 12,000 new jobs were added in May 2018, below the expectations of 18,000
jobs. Unemployment in Australia is defined as a person having no work or job or unemployed
for 52 weeks. In this report unemployment issues in Australia in last 10 years is been examined
and its impact on Australian economy is been studied. The concept of unemployment is not
precise. In countries like Australia this can be true, where through formal economy, production
of goods and services are done and for low wages people work. Immense level of social and
economic damage has been caused by long term unemployment. Due to higher unemployment
rates in the nation, there would be political instability in Australia.
Government have reduced the power of trades unions who would bargain for wages which
are above level of market clearing and cause real wage unemployment. With this policy
government will solve real wage unemployment situations in Australia by reducing and
restricting influence of trade unions, and has implemented various policies towards reducing
unemployment from the nation. Unemployment is a major event that occurs in a persons' life. It
can have a destructive impact on a person's life and in economy of a country.
Unemployment can be a loss of priceless resources that are productive to the economy.
Major negative effect of Long term unemployment's is wastage of skills. Demand side policies
and supply side policies are being made for controlling unemployment in the country. Demand
side policies involves monetary and fiscal policies, cutting interest rates, increasing aggregate
demand, etc. Supply side policies involves subsidies provided to firms for encouraging
establishing new industry in depressed regions, training and education, flexibility in labour
market, etc.
MAIN BODY
Standard international definition of unemployment is adopted by Australia, which states
the meaning of unemployment: as for at least one hour in a week people are unemployed and
actively seek for work and accept any job for low wage (Carvalho, 2015). People who really do
want to work, but have given up continuously looking for a job, are excluded from
unemployment measurement. Those who have been unemployed for 52 weeks or more are
termed as long term unemployed. Large changes have been experienced by the Australian
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economy in its structure of what it manufactures and how. These have been caused by fuller
integration to the world markets, along with the rise of competition from lower wage countries in
production of goods and services; by technological change; and by changes in the pattern of
consumption, as real incomes rise (Ezzy, 2017). The concept of unemployment is not precise. In
countries like Australia this can be true, where production of goods and services are done and for
low wages people work. It has enabled the unemployment rate to fall below the levels that were
attained at the peak of the last two prosperities. This in turn has called into question previous
understandings of how down unemployment can trip before irresistible pressures for rising
inflation are felt.
Unemployment have risen in Australia in past few years and have jumped to its highest
level in 10 years. It has come to the rate of 6.4 percent in June 2017 in its highest point since
2002, while in June 2018 rate have alleviated to 5.4 percent (Smith, 2018). Many of them have
lost their jobs, while 14,500 full-time jobs were added, around part-time jobs of 14,800
disappeared from the Australian economy. In most problematic areas, it is evident that the gain
of reduced unemployment in areas such as employment opportunities for older workers, long
term unemployment and youth unemployment. From 12.3% to 13.3%, the youth unemployment
rate has risen. Country needs to plan for jobs as the record rise in underemployment have
become a serious concern. Even while the company’s profit is at its highest in 40 years, the
growth in wages of employees are at lowest it has been in 20 years (Unemployment-rate
Australia 2018). There are significant challenges that lie ahead, as too many Australians are
remained unemployed, without any security and dignity of work (Bishop and Cassidy, 2017).
When rate of jobless decline to 5 percent or lower, labour market in Australia would be
considered at or near full employment. As more female workforce and older persons have
entered labour manpower, participation rate decreased a bit to 65.5 percent but remained in
levels that was in year 2011. Below the expectations of 18,000 jobs, overall of 12,000 net fresh
jobs were added in May 2018. Even though, the annual growth rate of job in Australia of about 3
percent is of almost double the amount of creations of job in U S of 1.6 percent.
When full-time work dropped by 20,600, with increase in part-time jobs of 32,700, it
caused a series of breakdown and was less encouraging. There are no near term triggers for rise
of interest rates by Reserve Bank of Australia, as there is less upward pressure of inflation and
wages with labour supply expanding to meet their demand. Therefore, higher selling prices for
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the products and services are implemented, as rates are remained hold until skill shortages are
been evidenced which leads to increase in wages of employees (Considine, O'Sullivan and
Nguyen, 2014). Reserve bank of Australia have cut their interest rates to the lowest record of 1.5
percent in 2016 and are likely to unchanged the policy for another year. During the decade long
mining boom which began in early 2000 s, where workers enjoyed only half the rate. During last
month’s quarter showed annual wage growth of 2.1 percent.
Unemployment is a major event that occurs in a persons' life. It can have a destructive
impact on a person's life and in economy of a country. Unemployment can be a loss of priceless
resources that are productive to the economy. Long term unemployment's one of the major
negative outcome is wastage of person's skills. Skills of an employee or workers will begin to
drop, due to lack of training and use it is more likely, if the person stays out of work for a longer
period (Ballantyne, De Voss and Jacobs, 2014). It was 14 times higher than average in the index
calculated for well-being cost of skills atrophy that was $1.4 billion in march quarter alone.
Since, the depth of global financial crisis in 2008, long term unemployment has been rising at a
faster rate than total unemployment rate. Substantial attention has not been given to the steady
increase in long term unemployment. There was a decline of $1.2 billion recorded through a
broader measure of well-being than traditional indicators of economy. This caused a fall in index
for a third consecutive time quarterly. In the quarter, economy has improved with the strong rise
in national income.
Economy of Australia was lagging in Gross Domestic Product due to the decline in
index. GDP has raised from 1.1 percent to 3.5 percent for annual growth rate. Huge social and
economic damages have been caused by long term unemployment. Drags on the index have been
caused by high rate of obesity and untreated mental sickness. For determining the health of an
economy, unemployment rate can be used as a common measuring tool. Some sort of ripple
effect is being caused by unemployment in economy. Unemployment is usually called a lagging
indicator of economy as after unemployment rate starts to rise, economy of the nation usually
improves (Carvalho, 2015).
As one person lose his job, he/she worries about their future financial securities and cut
back their unnecessary spendings due to less disposable income. There would be less person who
will pay federal and state income taxes, less person would pay additional sale tax revenue, as
people loses their job. The income generated by the state or government will be low as there are
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less capable persons who could pay tax. High tax revenues are required for preventing a default
as country is facing a big debt crisis. Due to high unemployment, most of the unemployed in
Australia would become eligible for unemployment insurance and rather than contributing in the
economy in form of taxes, they would suck money from nation's economy, thus state's deficits
and tax revenue would increase.
Both employed and unemployed would be forced to experience a loss of disposable
income, as State would definitely increase taxes for compensate for the losses occurred in tax
revenue, if rate of unemployment continues to rise every quarter (Ezzy, 2017). It would become
a vicious cycle in economy as loss of disposable income again created a ripple effect and less
amount of finance or money would be spent in development of nation, which would lead to
losing of jobs by more number of people, unless this cycle is to be broken through changing
policies and other factors. Increase in unemployment rate would cause loss of output to
economy. Due to many unemployed in economy, the labours are being exploited as they have to
accept to work for low wages and have to work under certain unfavourable situations. There
would be political instability in Australia due to unemployment rates higher in the nation. For
generating or providing them job, unemployed persons would consider government worthless
and would engage themselves in activities that are destructive for the society, nation's economy
and infrastructure. In circumstances under which there is political instability, it would be difficult
for developing economy to grow.
Under circumstances of unemployment a person has no source of income in the country
and due to which poverty has increased. As there is no money been generated, it would increase
the burden of debt in the economy, which would result in rise of economic problems in
Australian economy. Due to unemployment there is less or no productive use of labour forces,
which would cause wastage of most valuable human resources. Economic growth of Australia
would increase if human resources are being properly and efficiently utilised (Lobo (2018)).
There are also some social consequences of unemployment in Australia. It is more
difficult to find a job if an individual is unemployed for a longer period. More social problems
are caused by large number of unemployed persons, than a small number. Living standards of
persons would fall and they would be forced to use loan finance for purchases and over use
credit which would increase their liability. Due to rise in unemployment in Australia crime rates
have increased as they have less respectable work to accept and would engage themselves in
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illegal activities in order to earn more money. Increase in rate of unemployment would increase
the stress level of the persons, as they loss their job and can't survive without any financial
support (Smith, 2018). Due to increase in indebtedness of persons they could lose their home and
can become homeless and breakdown in family would occur as they can't feed their family.
The Australian government have made many policies for reducing unemployment in the
nation. There are two main strategies for reducing unemployment are demand side and supply
side policies. Demand side policies are taken for reducing unemployment caused by recession.
Whereas, Supply side policies are taken by government for decreasing natural rate of
unemployment or structural unemployment. Some other policies taken by government for
declining the rate of unemployment are fiscal policies to cut taxes for boosting aggregate
demand, lower minimum wages for reducing real wage unemployment, monetary policy like
cutting interest rates and increasing aggregate demand, more flexibility in labour market,
subsidies provided geographically for encouraging firms to invest in regions with more
unemployed and help to reduce structural unemployment through proper training and education
(Gregory and Smith, 2016).
Aggregate demand and economic growth rate is raised with the help of government fiscal
policies for reducing unemployment within Australia. Australian government have to prosecute
expansionary fiscal policy like increase in spending by government and involves cutting down
taxes. Higher aggregate demand is being boosted by lowering taxes which would increase
disposable income and helps to increase consumption. Real GDP would increase with an
increase in Aggregate Demand (Li, Duncan and Miranti 2015). There would be fewer losses of
job, as with higher aggregate demand and growth of strong economy less companies would go
bankrupt. Therefore, Australian government have to step in for creating additional demand for
decreasing unemployment rate.
Cutting interest rates could be involved in monetary policy. People are encouraged to
spend and invest in economy by decreasing interest rates which would reduce the cost of
borrowing. Demand deficient unemployment is reduced with the help of increased aggregate
demand and also helps in to raise GDP. Exports are made more competitive as exchange rate are
reduced by lowering interest rate.
Supply side policies, micro economic issues are dealt with. Unemployment caused by
factors of supply side are identified and reduced to overcome flawlessness in labour market
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instead of aiming to hike overall aggregate demand (Campbell, 2016). There are certain policies
that Australian government have taken for reducing supply side unemployment. Education and
training programs are conducted by government for giving long term employment to
unemployed and to provide people with an opportunity to develop new skills which would
enable them to search work in developing sectors. Government have reduced the power of trades
unions who would bargain for wages which are above level of market clearing and cause real
wage unemployment. With this policy government will solve real wage unemployment situations
in Australia by reducing and restricting influence of trade unions.
Subsidies and tax breaks are provided to firms for employing the long term unemployed,
which helps them to gain new confidence and provide on the job trainings. Government takes
various policies for improving labour market flexibility by taking away certain restrictions for
employing workers. Such as making it easier for companies to hire and fire workers, get rid of
maximum working weeks, etc., may encourage more creation of jobs in different industries
(Bishop and Cassidy 2017). For overcoming geographical based unemployment, Australian
government made policies to provide subsidies and tax breaks to firms or industry who set up in
depressed area or regions where most unemployed are found.
CONCLUSION
From this report it can be concluded that unemployment level in Australia have raised in
past few years and have jumped to its highest level in 10 years. It has reached to the rate of 6.4
percent in June 2017 which is its highest point since 2002. Only about 12,000 new jobs were
added. Full-time work dropped by 20,600, with increase in part-time jobs of 32,700 which
caused a series of break down in the economy. Unemployment rate in a country can have a
serious impact on its economy. It can result in wastage of skills and talents of a worker’s or
employees. Due to many unemployed in economy workers are exploited and they have to accept
to work at low wages and have to work in unfavourable situations. Increase in unemployment
rate causes loss of output to economy. Government have made many policies for reducing
unemployment in the nation. There are two main strategies for reducing unemployment taken by
government are demand side policies and supply side policies. Demand side policies are taken
for reducing unemployment caused by recession whereas, Supply side policies are taken by
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government for decreasing natural rate of unemployment or structural unemployment. Policies
implemented have been proved for reducing unemployment rate in the country.
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REFERENCES
Books and Journals
Carvalho, P. (2015). Youth unemployment in Australia. Policy: A Journal of Public Policy and
Ideas, 31(4), p.36.
Ezzy, D. (2017). Narrating unemployment. Routledge.
Smith, D.E. (2018). Aboriginal unemployment statistics: policy implications of the divergence
between official and case study data. Canberra, ACT: Centre for Aboriginal Economic
Policy Research (CAEPR), Research School of Social Sciences, College of Arts and
Social Sciences, The Australian National University.
Li, J., Duncan, A., & Miranti, R. (2015). Underemployment among Mature‐Age Workers in
Australia. Economic Record, 91(295), pp.438-462.
Bishop, J., & Cassidy, N. (2017). Insights into low wage growth in Australia. RBA Bulletin,
March, pp.13-20.
Considine, M., O'Sullivan, S., & Nguyen, P. (2014). New public management and welfare-to-
work in Australia: Comparing the reform agendas of the ALP and the
Coalition. Australian Journal of Political Science, 49(3), pp.469-485.
Ballantyne, A., De Voss, D., & Jacobs, D. (2014). Unemployment and spare capacity in the
labour market. RBA Bulletin, pp.7-20.
Lobo, F. (2018). Unemployment and leisure: the Marienthal legacy. World Leisure
Journal, 60(2), pp.75-93.
Gregory, R.G., & Smith, R.E. (2016). 15 Unemployment, Inflation and Job Creation Policies in
Australia. Inflation and Unemployment: Theory, Experience and Policy Making, p.325.
Campbell, A. (2016). Employment services: Tackling the issue of unemployment. Parity, 29(10),
p.52.
Online
Unemployment-rate Australia. 2018. [online] Available through:
<https://tradingeconomics.com/australia/unemployment-rate>.
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