HI5003 | Economics for Business | The Impact Of Unemployment

 Write a report on the Impact/Effect of unemployment in the Australian economy in the last ten years.

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 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)

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.

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)

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.

References:

Abs.gov.au. (2018). Population clock. Retrieved from https://www.abs.gov.au/AUSSTATS/[email protected]/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