Full Employment

International Comparisons

The most striking feature of the graph below is the sudden increase in unemployment in the USA after the end of 2007. Prior to that time the rate of unemployment that was seen in these three countries was relatively similar. The global financial crisis (which started in the USA) ended that relationship.

The Japanese economy has generally experienced slightly lower rates of unemployment than we have been able to achieve in Australia. Despite an extended period of poor performance in regards to growth, the rate of unemployment in Japan has increased from 2.1% in 1991 to 5.3% in 2002. Even during the global financial crisis, the rate did not increase above 5.4%. Elsewhere in Asia, the unemployment rate in South Korea peaked at over 10% during this period.

International Unemployment

In the past it was reasonable to say that the Australian economy was performing poorly when compared to our major trading partners. Each of the countries mentioned has a much higher population than Australia, and as such needs significantly more jobs to maintain such low rates of unemployment.

However, there is evidence that this problem is beginning to be resolved, and this is revealed in the more recent data that is seen in the graph above. With an increased focus on exports, higher levels of education and developing trade relationships, the Australian economy has been restructured to ensure long term employment growth. As we now have evidence to suggest that it is possible to maintain lower rates of unemployment without the negative side effect of inflation, many economists in Australia are beginning to argue that a lower rate should be achievable. By 2005, the rate of unemployment in Australia was lower than the rate achieved in the USA, and comparable with that of Japan; by 2006 the rates of unemployment in the three countries were very similar, and this was maintained through until the beginning of 2008. While this is an excellent achievement, we should always remember that this equates to almost half a million Australians who are out of work. Accordingly, more must be done if they are to be able to join the workforce and make a meaningful contribution.

The impact of the credit crisis on the US domestic economy can be seen in the graph above. Unemployment increased from 5.0% at the beginning of 2008 to 9.8% by the end of 2009. This coincided with the beginning of a recession in that country. The figure may have climbed even higher, but the US government spent hundreds of billions of dollars supporting financial institutions and the automotive industry.

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