Analyzing Unemployment and Its Economic Impact in Australia

This report analyzes the impact of unemployment on the Australian economy between 2008 and 2018. It examines the concept of unemployment in Australia, differentiating between frictional, cyclical, and structural unemployment. The study reveals fluctuations in the labor force participatio...Read More

Running head: ECONOMICS FOR BUSINESS
Economics for business
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Table of Contents
Introduction:...............................................................................................................................2
Unemployment in Australian economy:....................................................................................2
Concept of Unemployment in Australia:...............................................................................2
Conclusion:................................................................................................................................6
References:.................................................................................................................................7

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Introduction:
The Australian economy possesses a mixed-market structure that helps the country to
become a developed one. As of 2017, the amount of nominal gross domestic product (GDP)
of this large economy was 1.32 trillion while the number of total population was 24.4 million.
Since 2008, nominal GDP of Australia has fluctuated due to various external macroeconomic
factors while total population has increased steadily during the same period. This report has
tried to analyse the impact of unemployment on Australian economy from 2008 to 2018.
Unemployment in Australian economy:
Concept of Unemployment in Australia:
Unemployment is a macroeconomic situation, where a person seeks to get a job at the
existing market wages but remains unable to find one. By calculating unemployment rate,
this macroeconomic indicator sometime represents economic condition of a country.
Australia has adopted a unique concept of unemployment through considering the standard
international definition. In this country, people are considered as unemployed if they did not
work for minimum one hour in the last seven days and furthermore they are looking for a job
actively and can accept a new job to start from the next week (Marks, 2018). Moreover, the
country considers that unemployment can be of three types, which are, frictional, cyclical and
structural. Frictional unemployment occurs when a person changes job by leaving the old one
and finding the new one. This type of unemployment exists for short period and for this, the
government does not experience any significant problem (Moore, 2017). Cyclical
unemployment, on the other side, occurs due to business cycle. During the period of
contraction, the number of unemployed people within the economy increases while the
opposite situation occurs when the economy experiences expansionary phase. The Australian
economy also experiences structural unemployment due to technological advances, as
workers lose their jobs due to lack of skills. The last two forms of unemployment influence

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Australia’s economic condition by large extend for which the government implements
various policies as well.
Since September 2016, the labour force participation rate has increased sharply from
1.1 percent to 65.5 percent, which has almost reached to the higher level. This participation
has increased chiefly because of huge employment of female workers, aged between 25 and
54 years. This participation rate of labour force has remained around 65.5 percent in 2011
and 2018 (Abs.gov.au, 2018). This rate has fluctuated due to low level of wages.
Figure 1: Labour force participation rate in Australia
Source: (Tradingeconomics.com, 2018)

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Figure 2: Unemployment rate in Australia
Source: (Tradingeconomics.com, 2018)
The above figure has represented that unemployment rate in this country has
increased significantly since 2008. During the global financial crisis, this period increased
steadily and remained at a higher level. This trend has fluctuated over the year though after
2015 this rate has started to decline, as the government has generated new employment
opportunity (Tradingeconomics.com, 2018). However, higher amount of labour supply and
lower demand for works has led the wage rate of this country to reduce further. This higher
rate of unemployment has affected socio-political and economical contexts of Australia
adversely. Firstly, the annual GDP growth of this country has remained below 3.5 percent
during the past ten years. Moreover, the unemployment rate has decreased after 2010 and
consequently the annual GDP growth of this country increased during the period
(Abs.gov.au, 2018). Figure 2 has explained this situation accurately.

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Figure 3: Annual GDP growth of Australia
Source: (Tradingeconomics.com, 2018)
Unemployment has hampered skills of workers and consequently those unemployed
persons have experienced psychological problem as well as health problem. Thus, average
life expectancy of those workers has reduced in Australia (Moore et al., 2017). Moreover,
unemployed person have lost their motivation to work efficiently and this further have
declined the responsibility and social values of those workers.
Figure 4: Total productivity of Australia
Source: (Tradingeconomics.com, 2018)

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According to figure 4, total productivity of Australia has increased over the year. The
labour participation rate between 2008 and 2012 was low and consequently the total
productivity of Australia was law during this period (Bates, Callander, Lindsay & Watt,
2018). As the rate of labour participation has started to increase over the year, total
productivity of this country has started to increase as well.
Conclusion:
The report has derived that the unemployment rate of this remained high during the
last ten years. Labour force participation rate was also very high. As a result, the annual GDP
growth of this country has remained almost stable. Moreover, total productivity of this
country has also started to increase over the year. Hence the government can impost various
government policies to reduce the unemployment in this country.

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References:
Abs.gov.au. (2018). Population clock. Retrieved from
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Web+Pages/Population+Clock?
opendocument&ref=HPKI
Bates, N., Callander, E., Lindsay, D., & Watt, K. (2018). Labour force participation and the
cost of lost productivity due to cancer in Australia. BMC public health, 18(1), 375.
Marks, G. N. (2018). Do the labour market returns to university degrees differ between high
and low achieving youth? Evidence from Australia. Journal for Labour Market
Research, 52(1), 5.
Moore, T. H. M., Kapur, N., Hawton, K., Richards, A., Metcalfe, C., & Gunnell, D. (2017).
Interventions to reduce the impact of unemployment and economic hardship on
mental health in the general population: a systematic review. Psychological
medicine, 47(6), 1062-1084.
Tradingeconomics.com. (2018). Australia - Economic Indicators. Retrieved from
https://tradingeconomics.com/australia/indicators