Full Employment

Unemployment was a key issue in the election campaign of 2007.  Shortly after the election, a small increase in the unemployment rate was recorded; in early December 2007 a rate of 4.5% was announced.  More significant was the outlook published at that time.  For the first time in many years, economists expected the Australian unemployment rate to increase in 2008.  As it turned out, the unemployment rate experienced only a very small increase in that year, peaking at 4.4% in December after falling to 4.2% during the year. 

 

The global financial crisis had a significant impact on the ability of the Australian economy to generate new jobs.  Despite this, more people were entering the workforce every day; during 2009 the Australian population increased to exceed 22 million people for the first time, and yet the participation rate did not fall.  This suggests that new school leavers and migrants were entering the market, and fewer people were retiring (perhaps as a result of the fall in the sharemarket that was seen in the year leading up to March 2009).  These factors combined to push the unemployment rate up to 5.8% during this period.

 

However, it should be remembered that things could have been much worse.  In his budget speech for May 2009, the federal treasurer Mr Wayne Swan predicted that the unemployment rate would peak at 8.5% during the 2009/10 financial year.  Increasing conifdence and a significant fiscal injection from the government combined to ensure that this ultimately did not come to pass; the Australian unemployment rate remained below 6% throughout the global financial crisis.  With the combined impact of strong fiscal stimulus and very low interest rates, the unemployment rate quickly fell back towards 5.0%.  In the second half of 2011 it did increase to 5.3%, which prompted the RBA to cut the cash rate by 25 basis points in the second last meeting of the year.