Full Employment

International Comparisons

The rate of unemployment in Australia has traditionally been higher than that of our major trading partners. After the recession of 1990/91 the Australian unemployment rate peaked in excess of 10%. At the same time, the unemployment rate in the USA also peaked – at 7.3%. This is the highest rate of unemployment that has been experienced in the United States at any time in the last 20 years. On the other hand, the Australian rate of unemployment did not fall below this figure until the year 2000.

Similarly, the Japanese economy has experienced much 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. In this case, the highest rate that has been observed is lower than the lowest figure that the Australian economy has been able to achieve. Elsewhere in Asia, the unemployment rate in South Korea peaked at 7.4% just after the Asian economic crisis.

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 has been maintained through until 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 6.1% by the end of the year.  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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