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Macroeconomic Policy and Employment Growth in Australia

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  • A. J. Phipps
  • J. R. Sheen

Abstract

This article, which explores various aspects of macroeconomic policy and employment growth, is prompted by the relative lack of attention given to these issues in the Green and White Papers on unemployment. The problem of hysteresis reinforces the generally recognised need to reduce the excessive volatility of output and employment growth in Australia. International comparisons presented in the article suggest that Australian output and employment growth have been more volatile than those of the three major OECD countries. Reduction in macroeconomic volatility requires more effective short‐term demand management than we have had in the recent past, and in turn, means that we must know more about the strength and timing of the effects of major macroeconomic policy instruments on employment growth and unemployment. This article presents employment growth equations for Australia over the period 1979–93 which incorporate domestic macroeconomic policy effects as well as the influences of the international business cycle. We show that monetary and fiscal policy have had a significant impact on the evolution of employment in Australia and, in particular, that tight monetary and fiscal policy contributed substantially to the recession of 1990–92.

Suggested Citation

  • A. J. Phipps & J. R. Sheen, 1995. "Macroeconomic Policy and Employment Growth in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(1), pages 86-104, January.
    • Handle: RePEc:bla:ausecr:v:28:y:1995:i:1:p:86-104
    DOI: 10.1111/j.1467-8462.1995.tb00877.x
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    References listed on IDEAS

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    1. Siegloff, Eric S & Groenewold, Nicolaas, 1987. "Policy Ineffectiveness: Tests with Australian Data," Australian Economic Papers, Wiley Blackwell, vol. 26(49), pages 179-187, December.
    2. Russell, Bill & Tease, Warren, 1991. "Employment, Output and Real Wages," The Economic Record, The Economic Society of Australia, vol. 67(196), pages 34-45, March.
    3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    4. repec:syd:wpaper:175 is not listed on IDEAS
    5. Tom Valentine, 1993. "The Sources Of Unemployment: A Simple Econometric Analysis," Economic Papers, The Economic Society of Australia, vol. 12(4), pages 1-20, December.
    6. Phipps, A J, 1983. "Australian Unemployment: Some Evidence from Industry Labour Demand Functions," Australian Economic Papers, Wiley Blackwell, vol. 22(41), pages 333-344, December.
    7. Trivedi, P K & Baker, G M, 1985. "Equilibrium Unemployment in Australia: Concepts and Measurement," The Economic Record, The Economic Society of Australia, vol. 61(174), pages 629-643, September.
    8. Jerome Fahrer & Alexandra Heath, 1992. "The Evolution of Employment and Unemployment in Australia," RBA Research Discussion Papers rdp9215, Reserve Bank of Australia.
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    Cited by:

    1. Robert Dixon & John Freebairn & G C Lim, 2004. "An Employment Equation For Australia: 1966-2001," Department of Economics - Working Papers Series 892, The University of Melbourne.
    2. Ij. Macfarlane, 1999. "Australian Monetary Policy in the Last Quarter of the Twentieth Century," The Economic Record, The Economic Society of Australia, vol. 75(3), pages 213-224, September.
    3. George Argyrous & Megan Neale, 2001. "Labor Market Disability: Implications for the Unemployment Rate," The Economic and Labour Relations Review, , vol. 12(2), pages 263-284, December.
    4. David Shepherd & Robert Dixon, 2008. "The Cyclical Dynamics and Volatility of Australian Output and Employment," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 34-49, March.
    5. Doucouliagos, Chris, 1997. "The Aggregate Demand for Labour in Australia: A Meta-analysis," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 224-242, December.
    6. Narayan, Paresh Kumar, 2008. "An investigation of the behaviour of Australia's business cycle," Economic Modelling, Elsevier, vol. 25(4), pages 676-683, July.
    7. I.J. Macfarlane, 1998. "Shann Memorial Lecture: Australian monetary policy in the last quarter of the twentieth century," Economics Discussion / Working Papers 98-22, The University of Western Australia, Department of Economics.

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