Unemployment In Australia Essay

Unemployment refers to the number of people who are not working but seeking work (Dixon and O'Mahony, 2015). In the years following the Global Financial Crisis, the unemployment rate in Australia has been hovering from the 5-6% range (Tradingeconomics.com, 2017), which is in the band targeted by the Reserve Bank of Australia. If the rate of unemployment becomes too high, the economy will be impacted by a myriad of negative economic and social consequences. From an economic perspective, a high unemployment rate could easily lead to downturn, as resources are allocated inefficiently, consumption decreases and production decreases. Moreover, it creates a budget strain on the government, as tax revenue decreases however spending on welfare increases. …show more content…
This could mean a loss in industry knowledge, technical ability, education due to advancements, and just the operational requirements of certain industries and occupations. This can allow hysteresis to occur, meaning those who are only unemployed in the short term, or due to the level of economic activity can easily turn into long-term structural unemployment, due to the loss of skill. This is the process of hysteresis, which is the economic concept that states that unemployment in the current period of time, results in future unemployment as people lose their skills, ability and knowledge (Dixon and O’Mahony, 2015). This can also affect new entrants into the labour force, such as university graduates. If aggregate demand in the economy is low, then demand in the labour market would be low as it is a derived demand. Therefore, hysteresis would again occur as those new entrants would not be able to break into into the workforce and develop the skills necessary to gain employment. The result of the deterioration of labour market skill, would have a domino affect on the entire economy as it would cause a loss in productivity and international