Full Employment

In theory, an increase in business confidence should lead to an increase in investment spending, and therefore an increase in aggregate demand. As the rate of aggregate demand increases, we may see a corresponding decrease in the rate of unemployment.

 

This link is made clear in the graph above.  By June 2008 business confidence had taken a dramatic turn.  The onset of the global financial crisis forced the sharemarket down, and business managers began to suggest that it was very unlikely that they would be taking on new employees in the next twelve months.  The business confidence index fell to -7.5, and almost immediately the unemployment rate began to increase.  However, it was not all "bad news".  Originally it had been anticipated by both the federal government and the International Monetary Fund that unemployment in this country would increase to around 8.0%.  Although business confidence was still recorded as a negative number in June 2009, it had shown some signs of recovery.  By September of that year a strong positive number was recorded.  This contributed to the fact that the unemployment rate did not reach the peaks that were expected; after increasing to 5.8% the unemployment rate stabilised, and by early 2010 had fallen to a slightly lower figure.

 

In 2011 business confidence wavered; in the first half of the year outcomes were generally positive, which helped to ensure that the unemployment rate continued to fall.  By Jne of that year the unemployment rate was recorded at 4.9%.  By the end of the year this figure had increased to 5.3%.  Businesses had started to operate in a more cautious manner, and as a result many full time and some part time positions were lost during this period.