Impact of the Global Downturn on Unemployment in Australia

Satisfactory Essays
Full employment involves the interpretation of the full employment of labour, where the economy is at the natural rate of unemployment which is caused by supply side factors rather than the lack of demand. This concept reflects the fact that although there is no cyclical unemployment, there will still be a certain level of frictional, seasonal, structural and hardcore unemployment in the economy. The Government will try to achieve the natural rate of unemployment through successful implementation of its macroeconomic policies and also microeconomic reform to reduce the natural rate of unemployment in the long term. The benefits of this include a rise in the overall level of living standards as a result of the increased production levels in an economy and the decline in adverse economic and social problems associated with unemployment such as personal and family problems, lessening the burden on the Government’s revenue.

The impact of the Global Financial Crisis on unemployment levels

As a consequence of the global downturn, jobs in Australia held the most devastating impact with employment contracting over 2009-10 and labour markets deteriorating rapidly with millions joining the jobless trend globally. The unemployment rate is expected to peak at 8.5% in 2010-11 before falling as the economy recovers. This is because as the demand for labour is a derived demand, when economic growth declines, so too will the demand for labour as consumer spending will deteriorate and businesses defer investment plans. As well as unemployment, there was also a shift towards the casualisation of labour. As the economic outlook became uncertain and demand and output delayed, employers seek casual and part-time workers to manage risk, leaving many of those who remained employed working fewer hours over the short term increasing levels of underemployment.

Economic recovery package – use of macroeconomic policies

Fiscal policy

The Government’s early and decisive fiscal stimulus packages have helped to shield the Australian economy from the worst impacts of the global downturn. The strategy had been designed to strengthen the future capacity of the economy while also providing a stimulus with immediate effects. The Government’s actions have been estimated to support up to 210,000 Australian jobs.

As a consequence of the worst global recession since the Great Depression, the Government had implemented a fiscal deficit as well as the operation of automatic stabilisers such as unemployment benefits. When the economy moved into recession, the level of economic activity fell, causing a rise in unemployment.
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