Economics Report: Analysis of Unemployment in the Australian Economy

This report provides a comprehensive analysis of unemployment in Australia. It begins by outlining the reasons for unemployment in developed economies, including cyclical and natural rates, and then delves into the specific causes of unemployment within the Australian context, such as structural, frictional, and cyclical factors. The report examines the methods used to measure unemployment, highlighting any gaps or biases in the data. It also explores the relationship between unemployment and inflation in Australia, discussing the relevance of the Phillips Curve. Furthermore, the report investigates regional variations in unemployment across Australia, focusing on Tasmania and Western Australia, and identifies the unique challenges faced by each region. Finally, the report proposes various policies that the Australian government can implement to effectively decrease the unemployment rate, offering insights into demand-side and supply-side interventions. This report is a valuable resource for students seeking a detailed understanding of the economic factors influencing unemployment in Australia.

Running head: ECONOMICS
Economics
Name of the student
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Table of Contents
Unemployment in Australia.............................................................................................................3
Introduction......................................................................................................................................3
Reason for unemployment in developed economies.......................................................................3
Way of measuring unemployment...................................................................................................4
Gap in Measurement........................................................................................................................5
Reason for unemployment in the Australian economy....................................................................6
Relationship between unemployment and inflation in the Australian context................................7
Two regions of Australia which have different issues of unemployment.......................................8
Policies the Australian government can implement to decrease unemployment............................9
Conclusion.....................................................................................................................................11
Reference list.................................................................................................................................12

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Unemployment in Australia
Introduction
Australia is a sovereign country, which is known to comprise the mainland of the
Australian continent. It has been found out that unemployment in Australia is quite high in nature
presently along with the sluggish growth of wage. The unemployment rate in Australia is known
to rise by 0.1 per cent during the present year. The full-time employment in the present year has
decreased by 6300 to 8.8 million people while the part-time employment known to have
increased part-time employment. The Australian economy is known to be a large mixed market
economy with the gross domestic product of A$1.70 trillion since 2017.
Reason for unemployment in developed economies
Unemployment in the developed countries of the world can be cyclical unemployment,
which takes place when the economy is in recession. The second reason can be the natural rate of
unemployment, which takes place due to changes in the labour markets, which includes
government regulations. The cyclical unemployment takes place especially due to ups and downs
in the economy1. The recession is known to have a domino effect, which leads to a rise in
unemployment and less growth and drops the spending of the consumer too. This affects the
business, which retrenches workers because of accrued loss. The economic depression takes
place owing to consecutive periods of decline in the gross domestic product (GDP). Cyclical
unemployment also takes place during the time of depression in the economy. Therefore,
fluctuations in an economy are one of the reasons that cause a number of jobs to fall in
1 Golebiowska, Kate, Amani Elnasri, and Glenn Withers. "Responding to Negative Public Attitudes towards
Immigration through Analysis and Policy: regional and unemployment dimensions." Australian Geographer 47, no.
4 (2016): 435-453.

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comparison to the number of jobs demanded and thereby give rise to cyclical unemployment that
is prominent inside a business cycle. Economic output is at the maximum when expansion in
economic activity boosts the business cycle high and thereby increases employment, and as a
result, cyclical employment pegged low.
The natural unemployment rate is prominent in developed countries, which is known to
remain low from 4.5 per cent to 5.5 per cent.
Way of measuring unemployment
The US Bureau of Labor Statistics (BLS) is the apex body in the US that keeps the record
of both unemployment and employment of the individuals who are more than 16 years. The
unemployment rate is calculated with the use of two different surveys pertaining to the labour
force, which are (a) the Current Population Survey (CPS) and the other is (b) the Current
Employment Statistics Survey (CESS).
The CPS is commonly known as the domestic survey where the survey specifically is
conducted taking sample more than fifty thousand households2. The said survey follows the
definition of ILO for the measurement of unemployment and employment rate.
The CESS is the survey that is done based on payroll structure, the current employment
statistics are known to be exercised based on the sample of more than 1 lakh business and
government agencies which is known to represent 4 lakh individual employees3.
2 Carvalho, Patrick. "Youth unemployment in Australia." Policy: A Journal of Public Policy and Ideas 31, no. 4
(2015): 36.
3 Golebiowska, Kate, Amani Elnasri, and Glenn Withers. "Responding to Negative Public Attitudes towards
Immigration through Analysis and Policy: regional and unemployment dimensions." Australian Geographer 47, no.
4 (2016): 435-453.

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The rate of unemployment is alternatively measured with the claim reports released
weekly for the unemployed insurance. Data updation of the unemployment rate is done on
monthly basis.
The US Bureau of Labor Statistics is also known to use the six measurements while
calculating the rate of unemployment. These measures are known to range from U1 –U6 and
have known to take place from 1950 to 2010.
The unemployment is accounted as the number of people that are actively participating in
the workforce that is willing and finding work but not getting one. The people that are eligible to
claim Job Seeker’s Allowance are measured with Claimant Count Measures. The data of the
measure is adjusted seasonally in order to interpret the predictable changes in labor demand
occurred seasonally.
LFS or the Labor Force Survey is the kind of survey that counts the number of people
that includes the people currently unemployed, engaged in part-time work and was unemployed
and searching for work in the past month and the people that are unemployed but can join job
immediately. LFS works on the basis of internationally accepted unemployment definition, and
thus it is possible to compare unemployment across the country.
Gap in Measurement
The calculation of unemployment features biasness and errors that give rise to
inconsistency in the report. No measurement of unemployment is completely free of errors. The
reason is that there are people who are looking for a job but not included in the official data. The
official records of unemployment are known to miss the “hidden unemployed” rate. Workers are
termed as hidden unemployed when they are being jobless for a long time and stop searching for

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jobs. In many countries, the data on unemployment is known to ignore the extent of
underemployment.
In the case of various low-income countries, the validity of the data of the labour market
might lead to poor, causing published figures to be inaccurate in nature. There is also a reason
for sampling error in the data.
Reason for unemployment in the Australian economy
The change in the structure of the labour market is one of the reasons that generated
unemployment in Australia. The new policies introduced by the government of Australia along
with the change in work nature and demand of the employers have contributed to the structural
change in the labor market. The three major reasons behind the cause of unemployment is
structural unemployment, frictional unemployment as well as cyclical unemployment. The
unemployment rate is one of the most commonly used indicators in order to understand the labor
market.
Frictional unemployment is known to take place as the result of regular movement of the
individual in the labor market. Frictional unemployment also takes place due to changes in
personal circumstances as a result of migration to another region. This can also take place as a
result of persons leaving jobs for a higher payment.
The reason for the existence of joblessness in Australia is the unemployment caused due
to structural changes. The structural unemployment takes place as a result of the presence of
divergence between skill requirement and skill supplied by workers with the change in the
structure of the economy, the structure of the industry changes. The job types are known to

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change the technology as well as the locality of work. Workers with irrelevant skills are also
known to experience structural unemployment.
Cyclical employment is the third kind of unemployment. The cyclical unemployment
occurs due to change in the aggregate demand in the economy. The deficit in the aggregate
demand leads to a fall in output of the economy that further causes unavailability of jobs. Due to
this, unemployment occurs, as workers searching for jobs are not being recruited.
Relationship between unemployment and inflation in the Australian context
The Philips Curve is known to explain the short run relationship between the
unemployment and inflation rate. The relationship between the two factors inflation and
unemployment found to be inverse. The inverse relationship states that the rate of unemployment
decreases in the economy with the increase in the inflation rate.
The above relationship between inflation and unemployment knew to have faltered in
much of the developed world, including Australia. The Philips curve in Australia known to have
demised. The Philips curve is known to state that tight labor markets should be forcing the firms
for raising the wages, which in turn will be raising the price of the products in order to cover the
cost. The employment and inflation of Australia remained to have relatively intact in nature since
the 2008 crisis. However, after the mining boom ended and the commodity price slid during
2015, the unemployment started taking place — the high level of unemployment known to have
raised the real wage growth higher nature.
The Australian wages have been presently the lowest in the two decades. One of the
reasons behind the low wage growth is the decline in the non-accelerating inflation rate of

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unemployment. It is also termed as NAIRU. In recent years, the rate of underemployment has
also increased a lot in Australia in recent years.
Two regions of Australia which have different issues of unemployment
According to the labor market information portal, it can be found out that Tasmania in
Australia has the highest rate of unemployment, which is 6.8 per cent, and in Western Australia,
the rate of unemployment is 6.1 per cent.
Structural unemployment is one of the key factors that caused unemployment in
Australia. One of the major cause of unemployment in Australia is structural unemployment.
Structural unemployment occurs when the industries are known to decline due to the change in
long term market conditions. Globalization is an increasingly significant reason for seasonal
unemployment in many countries. The unemployment caused due to structural changes is a kind
of involuntary unemployment, which are caused by the difference between the employer
demanded skills and skills offered by workers.
In 2018, unemployment in Western Australia known to have risen to the highest level in
16 years. In Western Australia, the increase in unemployment led to a large amount of payroll
tax and trading hours4. The Commerce and Industry chief of Western Australia, Rick Newnham
states the unemployment took place due to anti-job policies. A record of 1,343,800 persons had
been in the labor force last month. One of the reasons behind the high unemployment rate in
4 Healy, Joshua. "The Australian labour market in 2014: Still-ill?." Journal of Industrial Relations 57, no. 3 (2015):
348-365.

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Western Australia is the “participation rate”. The participation rate who are known to looking
for work had been slowly shrinking for months. Most of the jobs created in WA have been
mostly full time; however, there has been a decline in full-time jobs recently in the market.
Therefore, in the present year, it has been found out that the change in incremental
unemployment in Western Australia had been the second highest since 2002.
The other state that is suffering from the unemployment rate in Australia is Victoria. The
unemployment rate of Victoria has exceeded and reached to more than 7 per cent during 2017.
During that time, the debt of government had also been quite high in nature. The economist
stated that Victoria has been on the incorrect side of the growth path. The manufacturing
industries had been pulled down by the high dollar, which also termed it to be one of the slowest
growing areas. The unemployment in Queensland was basically due to the end of the mining
boom5. Victoria is also known to suffer from the population explosion. The fast growth of the
population in Victoria might have helped it at one time; however, here is a recent need for
developing an infrastructure to serve the population. Therefore, it can be said that one of the
major causes of unemployment in Victoria is the huge growth of population.
Policies the Australian government can implement to decrease unemployment
There are chiefly two policies, which are known to mitigate the issue of the
unemployment rate
The two main types of decreasing unemployment are
5 Agllias, Kylie, Amanda Howard, Leanne Schubert, and Mel Gray. "Australian workers' narratives about
emergency relief and employment service clients: Complex issues, simple solutions." Australian Social Work, 69,
no. 3 (2016): 297-310.

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 The policies based on the demand side are known to lessen the demand deficient
unemployment. The demand deficient unemployment takes place mainly due to the
recession.
 The policies based on the supply side are known to reduce the structurally caused
unemployment.
The monetary policies are mended to cut the interest rates such that it enhances the aggregate
demand. The other policy is the Fiscal policy, which is known to reduce the tax rate with the aim
to enhance the aggregate demand. The policies based on the demand side are known to be critical
during the recession.
Fiscal policies are known to reduce unemployment by increasing the rate of increase in
aggregate demand along with economic growth. The Australia Government, therefore, required
implementing the expansionary fiscal policy, which involves cutting of taxes and raising the
expenditure of the government. The lower tax is known to increase disposable income, which
also helps in raising consumption. The fiscal policy will give rise to high aggregate demand. The
rise in aggregate demand will cause real GDP to increase.
The second policy is the monetary policy, which states that this particular policy will be
cutting the rate of interest. The lower interest rate will be decreasing the borrowing cost and will
also encourage the people to spend as well as invest more6. The increase in the aggregate demand
will be helping in increasing the GDP, which will decrease the demand deficient unemployment.
The supply-side policies of unemployment are known to deal with the issues related to
6 Levantis, Theodore. "Urban unemployment in Papua New Guinea-it's criminal." (2019).

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microeconomics. The supply side policies might not boost the overall aggregate demand but
definitely help in overcoming the imperfections in the labor market, which in fact reduce the
unemployment7. The supply side unemployment takes place due to frictional structural as well as
classical in nature.
The government can, therefore, also help in reducing unemployment by giving proper
skill development training and effective education, reducing the power of trade nations,
providing subsidies in employment and also by improving the flexibility in the labor market.
Conclusion
In 2018, in Western Australia, unemployment increased to 16 years high. The huge
increase in unemployment in this part of the country led to a large amount of payroll tax and
trading hours. Unemployment in the developed countries of the world can be cyclical
unemployment, which takes place when the economy is in recession. The second reason is the
natural rate of unemployment that takes place due to changes in the labor markets, which
includes government regulations. Fiscal policies are known to reduce unemployment by
increasing the amount of aggregate demand and thereby influences economic growth. The
Australian government, therefore, required to implement the expansionary fiscal policy, which
involves the reduction of taxes and raising the expenditure of the government.
7 Carvalho, Patrick. "Youth unemployment in Australia." Policy: A Journal of Public Policy and Ideas 31, no. 4
(2015): 36.

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Levantis, Theodore. "Urban unemployment in Papua New Guinea-it's criminal." (2019).
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"Allocating environmental water and impact on basin unemployment: Role of a diversified
economy." Ecological Economics 136 (2017): 178-188.
Golebiowska, Kate, Amani Elnasri, and Glenn Withers. "Responding to Negative Public
Attitudes towards Immigration through Analysis and Policy: regional and unemployment
dimensions." Australian Geographer 47, no. 4 (2016): 435-453.
Carvalho, Patrick. "Youth unemployment in Australia." Policy: A Journal of Public Policy and
Ideas 31, no. 4 (2015): 36.
Oliver, Damian, and Serena Yu. "The Australian labour market in 2016." Journal of Industrial
Relations 59, no. 3 (2017): 254-270.
Healy, Joshua. "The Australian labour market in 2014: Still ill?." Journal of Industrial Relations
57, no. 3 (2015): 348-365.

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Myles, Nicholas, Matthew Large, Hannah Myles, Robert Adams, Dennis Liu, and Cherrie
Galletly. "Australia’s economic transition, unemployment, suicide and mental health needs."
Australian & New Zealand Journal of Psychiatry 51, no. 2 (2017): 119-123.
Furuoka, Fumitaka. "Unemployment hysteresis in the'Nordic Kitten': Evidence from five
Estonian regions." Panoeconomicus 62, no. 5 (2015): 631-642.
Agllias, Kylie, Amanda Howard, Leanne Schubert, and Mel Gray. "Australian workers’
narratives about emergency relief and employment service clients: Complex issues, simple
solutions." Australian Social Work 69, no. 3 (2016): 297-310.
Saunders, Peter, Melissa Wong, and Bruce Bradbury. "Poverty in Australia since the financial
crisis: the role of housing costs, income growth and unemployment." Journal of Poverty and
Social Justice 24, no. 2 (2016): 97-112.
Kifle, Temesgen, Parvinder Kler, and Sriram Shankar. "Immigrant job satisfaction: The
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