Unemployment in Australia: Economic Impact and Government Policies

This essay provides a comprehensive analysis of unemployment in Australia, examining its trends over the past decade, the economic impacts, and the government policies implemented to address the issue. The paper begins by defining unemployment and outlining its various types, including structural, frictional, cyclical, and classical unemployment. It then delves into the unemployment rate in Australia over the last ten years, analyzing fluctuations and identifying key periods such as the 2008-2009 economic downturn and the post-global financial crisis. The essay further explores the effects of unemployment on the Australian economy, categorizing the impacts into individual, social, and socio-political dimensions. It discusses the loss of income, reduced savings, and potential for skill erosion, along with the broader consequences of reduced economic growth, protectionism, and civil unrest. Finally, the essay examines the government policies aimed at reducing unemployment, classifying them as demand-side and supply-side policies, including fiscal and monetary interventions. The paper highlights the importance of low unemployment for efficient resource utilization, consumer confidence, and reduced government burden.

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Unemployment: Examination of Australian Economy
Introduction
Unemployment is not a clear-cut theory. Different scholars have examined the
unemployment phenomenon from different viewpoints. Like the classical economists attribute
unemployment to the effect real wages and market clearing wages have on the available jobs.
While John Maynard Keynes scrutinizes this subject by attributing unemployment to aggregate
demand effects, according to Keynes real wage is determined by employment (Keynes, 2018, p.
26).
For the purpose of this paper we will define unemployment as the situation of actively
seeking for employment but not being currently employed. The unemployment rate is
expressed as a fraction of the unemployed individuals divided by total labor force population
(Gustavsson & Österholm, 2014, p. 548). According to the data released by International Labor
Organization unemployment rate currently stands at six percent. Unemployment rate is
fundamental indicator to the economic wellbeing. It points out if the economy is optimizing
efficiently or the economy is not operating at the peak, as it is expected that everyone is to be
employed at some wage in optimized economy. Unemployed individuals within the labor force
are not only non-productive but also a drain of the society available limited resources (Lundval,
2014, p. 254).
Unemployment is an ongoing economic issue which is both complex and comprehensive
in nature due its long lasting political, psychological, moral development and social effects
(Arulampalam, 2013, p. 586). Some key types of unemployment include: structural

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unemployment also referred to as skill gap, it is unemployment which arises when there is a
mismatch between skills laborers in the economy possess and the skills demanded by the
employers in the economy. Secondly type is frictional unemployment, results from time spent
by a worker transitioning from one job to another. Other types include: cyclical unemployment,
involuntary unemployment and classical unemployment (Weiss, 2014, p. 242). This paper aims
at examining the unemployment records in Australia for the last ten years, diagnosing its effects
on the Australian economy and finally investigating the existing government policies employed
to curb unemployment.
Unemployment rate in Australia for the last 10 years
The Australian economy has experienced enormous changes in its structure in terms of
what it is producing and how. The technological changes have been the major cause of
employment disturbance in the economy. The Australian Bureau of Statistics (ABS) have been
conducting labor force survey on monthly basis. The aim of this house study is to reveal
fundamental estimates of unemployment rate in the Australian economy (Australian Bureau of
Statistics, 2013, p. 243). The unemployment rate increased by 1.75% between the years 2008-
2009, this was the period of economic downturn. It moved from 4% to about 5.75%, during this
period there was a decrease in the average hours of work per employee, total hours -worked in
a week by an individual declined significantly. This indicates a shift in the structure of the
employment from full-time to part time employment (Chang, et al., 2013, p. 239).
In the year 2010, the unemployment rate in Australia remained stable at 5.1%. The total
number of people employed within the economy increased by 45900 people, the employed

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population increased to 11.12 million people. In the following year 2011, the number of
employed people decreased by 29300, this saw the unemployment rate increasing to 5.2%, this
effect was triggered by fall in part time jobs. These figures remained steady in the year 2012,
the increase in employment was steered up by the increase in full time jobs to stabilize the
labor market. Unlike in the year2013, the unemployment rate climbed to 5.8%, this is
considered as post-global financial crisis as described by the economists’ forecast. It was
majorly contributed by the loss of both the full-time and part time jobs. During this period
youth unemployment rose to 17.3% (Arulampalam, 2013, p. 46).
In the following year 2014, the figures got worse with the unemployment rate reaching
6.1% by September. The number of unemployed persons increased by 29700 persons with total
population of the employed persons standing at about 11.92 million persons. Also the female
part-time employment declined by 31600 persons. In the periods of years 2015-2016, the
unemployment rate in Australia have floated in the scope of about 5.6-5.8 %. The figures
released by the Australian Bureau of Statistics indicates that this is the lowest unemployment
rate range since the year 2013 (Dolowitz, 2015, p. 243). It is a good proof for the government
efforts to increase employment growth in the Australian economy.
Recently in the month of August 2018, the figures released by Australian Bureau of
Statistics (ABS) reveals that the rate has unexpectedly dropped to 5.3%. More than 44,000 jobs
have been created in the economy. This is also attributed to the increased information about
the available jobs within the economy. The total number without jobs have remained at its
lowest level since the year 2012 (Ball, 2017, p. 256).

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Effects of unemployment on Australian Economy
Unemployment is one of the key life experience of an individual. Unemployment effects
on the Australian economy be broadly categorized into individual, social and socio-political
impacts. Its impacts are widespread as it not only affect the unemployed individual but also the
family members and generally the entire community. For example, the loss of income of the
parent affects the living standards of the family and also the coming generation. Impacts of
unemployment can be long lasting (Green, 2013, p. 273).In addition to the personal impacts of
unemployment, it is also a forfeiture of appreciated resources to the economy at large. As some
people leaves the economy in search of job elsewhere.
This constitutes the insightful economic, financial and budgetary effects of
unemployment. Those who leave the labor force reluctantly do not have the resources needed
for contented and stretched retirement. The resulting price paid by the community is increased
income and health support despite low productivity due to the loss of human capital. Usually,
those who are employed benefit from economic growth while the unemployed may be
demoted to secondary status (Layard, et al., 2015, p. 257).
The short term unemployment basically reduces an individual’s income level while the
long term unemployment reduces his ability to save for retirement and other long term goals.
Since his superannuation contributions vanish and his economic power to save from the
disposable come is also lowered. Most of the Unemployed Australian’s in the labor force have

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been victims of both the short term and the long term effects of unemployment with most of
the affected group being the mature-aged people, this is according to the study conducted by
the Australian Bureau of Statistics (ABS) in2016 (Cheshire, 2016, p. 167). Since most of them
have already existing financial obligations such mortgages and children’s education.
The recent records from the Department of Family and Community Services (DFaCS)
discloses a disturbing impact of unemployment, there is an increase in the number of mature
aged persons receiving income support. This is alarming since prolonged periods of dependence
can erode the skills of an individual and also their savings, consequently it can increase
marginalization within the community (Glover, et al., 2013, p. 234). This harms the economic
growth by generating redistributive pressure and further driving people to poverty, eroding
self-confidence resulting to unrest and conflicts.
It is reported that an economy with high unemployment, does not use all the available
labor to it. The economy is not optimizing available resources hence it is operating below its
production possibility frontier. The skills of the unemployed laborer go to waste and if the
condition is prolonged then there is high risk of the laborers permanently losing their skills.
Their life expectancy maybe reduced by seven years (Eisenber & Lazarsfeld, 2015, p. 355). The
economy with underutilized resources may result a slow economic growth as compared to
Alternative. High unemployment rates can encourage protectionism and xenophobia as the
domestic or native workers fear that foreigners are still their employment opportunities. The
effort to protect the existing domestic jobs usually include imposing legal barriers to control
influx of foreigners, crafting immigration barriers and other applicable trade barriers against the
foreign competitors.

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The impacts of unemployment are felt also in regional economies owing to its smaller scale.
Organizations based in regional Australia have indicated through their submissions that
restructuring have significant flow-on effects on their economies. The report released by the
Australian Workers’ Union (AWU) shows that people who are affected by downsizing and
industrial closures across the region are the basic-trade skilled or low skilled individuals. The
socio-political impacts of unemployment on the economy of Australia include civil unrest
(Griffin & Svensen, 2016, p. 543).
Most people in Australia can effectively manage unemployment if only it lasts for short
period. Not when the unemployment spell is prolonged, as it is associated with psychological,
financial and economic reparations. All these collectively impact negatively on the unemployed
individual’s welfare, their families and the general growth of the economy. In a nutshell,
unemployment is a painful loss of all the valuable productive resources which could help to
steer economic growth and improve living standards of the partisans in the economy. This is
responsible for the increased marginalization within the economy as impacts of unemployment
are not evenly distributed within the country (Lilien, 2014, p. 799).
Government policies aimed at reducing unemployment in Australia
The Australian government have been dedicated to lower the unemployment rates
below 4%. Low unemployment rates means that there are fewer people who are actively
seeking for job as compared to the population of active workers. Low unemployment facilitates
efficient use of technology and resources so as to achieve optimal production levels (Dolowitz,
2015, p. 26). This is beneficial to the companies and the general economy as a whole. Also it

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becomes easier for the domestic workers to find jobs when the unemployment is low. It is also
a positive indicator to the firms that the market place demand is stable even for the future, as
the consumer buying power have increased. Firms are more likely to hire more workers so as to
expand on their productions. And most importantly low unemployment reduces the burden on
the government and the taxpayers to support the unemployed within the economy (Dolowitz,
2015, p. 29).
Due to these benefits among others, the government have been actively involved in the
process of making and implementing policies with an aim to reduce unemployment rates in
Australia. These policies can be classified into two major categories as demand side policies and
supply side policies. Demand side polices are meant to increase or decrease aggregate demand
of consumers and also to contract or expand the economy (Dolowitz, 2015, p. 28). There are
two major demand side policies namely: fiscal policies and monetary policies.
Fiscal policies involves the government to deliberately alter its own expenditures and
taxation so as to affect the economy. To reduce unemployment resulting from the
disequilibrium between supply and demand; demand-deficit unemployment, then there is need
for the government intervention through fiscal policies to expand the economy. This involves
the government increasing its expenditure on goods and services, and decrease its taxes. This is
meant to expand the aggregate demand and also to increase real output (Cheshire, 2016, p.
234). This eventually increases real gross domestic product (GDP) and reduces unemployment
although there is a risk of demand-pull inflation arising. Low taxes increases the consumers
disposable income, they are able to purchase more goods and services in the economy. This
mechanism is referred to as expansionary fiscal policy (Sarno & Taylor, 2015, p. 672).

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Monetary policies involves the government intentionally altering the interest rates and
or supply of money to affect the economy. During economic recessions, unemployment rates
increases as the purchasing power of the consumers is lowered. The government can correct
this situation through the central bank. Lowering interest with the hope that the investors will
be enticed with easy credits. An increase in money supply causes a decrease in the interest
rates and equal increase in nominal output. The consumer spending also goes up. This
collectively increases the aggregate demand. The level of unemployment declines due to
increased investments in the economy by those borrowing loans and the increased aggregate
demand (Woodford, 2011, p. 256).
Generally the demand-side policies are used to influence the aggregate demand in the
economy. Aggregate demand is composed of consumer spending, government spending, net
exports and investments. These policies are mainly used for short term changes. The inflation
that results due to the expansionary policies can be controlled through contractionary policies
mainly by increasing the interest rates to relax the economy (Friedman, 2012, p. 231). Demand-
side policies are more effective in controlling the
The supply-side policies are only effective in controlling long term structural
unemployment. Supply side unemployment includes: frictional, classical and structural
unemployment. They deal with micro-economic concepts which aim at solving the
imperfections in the labor market and reduce unemployment. The government provides
interventionists policies in an attempt to reduce unemployment level in Australia. Examples of
these policies includes; better education and training, reducing the power of trade unions,

EMPLOYMENT IN AUSTRALIA 10
employment subsidies and improved labor market flexibilities (Fernández-Villaverde, et al.,
2014, p. 260).
The Australian government have employed sufficient resources to provide better
education and training to equip the long-term unemployed with new skills that will help them
to find jobs in the industries within the economy. This helps to reduce the structural
unemployment since the workers acquire skills that matches the industrial demand. The
Australian government intensively advertises vacancies in the government offices, better job
information helps to reduce frictional unemployment. The workers don’t have to spend more
time in search for jobs within the economy (Ball, 2017, p. 367).
Trade unions usually advocate for minimum wages, increment in wages, this causes
classical unemployment where wages are high above the market equilibrium. The Australian
government have employed measures to curb the trade unions influence allowing the wages to
fall to the equilibrium for the labor market to clear (Griffin & Svensen, 2016, p. 277). There is
also improved geographical mobility so that the workers are not confined to one economic
region by providing tax breaks to the firms set up in depressed areas, this helps to reduce the
geographical unemployment.
Conclusion
Unemployment also have primary benefits as more people are available for hire. This
means that both new and old business can recruit new staff with ease, without headhunting for
employees from other existing organizers. It is also beneficial to the employed group in the
workforce as it prevents inflation providing reverse army of labor that helps to monitor wages.

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Full employment also cannot be achieved since workers will avoid work when wages fall and
they are also likely to spend less effort at work. Ordinarily the employers avoid shirking by
keeping wages from decreasing so low that laborers being disinterested such that they become
unproductive.
It is also important to note that Australian population is also underemployed. Those
who are already classified as employed seeking for more employment opportunities than they
already have. Due to the continuous increase of the financial obligations, those who are
employed may seek for a better job or more jobs within the economy so as to effectively
manage their financial responsibilities.
All market economies have witness some level of unemployment which is caused by the
establishment of new firms, growth, decline and eventually death. This has significant changes
in the employment patterns. In present day most Australian citizens prefer to live and seek job
within an economic structure which can provide to them steady or secure jobs, stable prices
and a high living standards.

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