This story has the hallmark of the self-evident for those who’ve studied the Australian economy. We keep people on the dole to keep inflation low. This story is sourced from the ABC and it’s worth reading.
Economic Guru Professor Ross Garnaut from the University of Melbourne, says there are hundreds of thousands of Australians on unemployment benefits who shouldn’t be there.
He says the Federal Government and the Reserve Bank over the last 40 years, have allowed Australians to languish in unemployment to suppress wages and inflation.
Professor Garnaut said Australia should return to having genuine full employment with unemployment of 3.5 per cent or less.
It’s a shame when he was the principal economic adviser in the Hawke Government, that he didn’t flag this then.
Between 1946 and 1975, when Australia pursued an official policy of full employment, the national unemployment rate averaged below 2 per cent.
But since the Hawke Government of the 1980s, Australia’s policymakers have accepted higher levels of unemployment, which they say are “natural” for prevailing conditions.
Successive federal governments (both Labor and Coalition) deliberately recorded budget deficits to achieve that full employment.
They developed a new definition of full employment: full employment would mean the level of unemployment that keeps a lid on inflation. That’s called the NAIRU, or non-accelerating inflation rate of unemployment.
Professor Garnaut says Australia’s policymakers have repeatedly miscalculated the NAIRU, meaning they thought the economy was getting close to full employment when it wasn’t
“An average of several hundred thousand fewer people were employed [from 2013 to 2019] than would otherwise have been possible,” he says.
“This is voluntary unemployment — voluntary for the Reserve Bank, because it is unemployment that the Reserve Bank focuses on”
Professor Garnaut says Australia should use as many resources as possible to get the unemployment rate down to 3.5 per cent by 2025, as a matter of national urgency.
He says the budget deficits needed to achieve full employment should be funded “directly or indirectly” by the Reserve Bank, “at least until full employment is in sight.”