The Cambridge Handbook of the Social Sciences in Australia

By Ian McAllister; Steve Dowrick et al. | Go to book overview

Things are further complicated by the fact that the so-called 'natural rate' of unemployment is also sometimes used to denote a NAIRU. This is confusing because the term 'natural rate' is a more general one used to describe the hypothetical unemployment rate that would emerge if certain equilibrium conditions were met. Groenewold and Hagger (1998), for instance, estimate the natural rate by constructing a model that enables them to estimate the rate of unemployment that would emerge in the absence of labour mismatch induced by differences in sectoral growth rates in the economy. Fahrer and Pease (1993) do not model the equilibrium unemployment rate itself, but the so-called Beveridge curve, which describes an equilibrium relationship between the job-vacancy rate and the unemployment rate. Holding the vacancy rate constant, shifts in this curve can be used to infer changes in factors such as the efficiency of job search, and skill and locational mismatches between job vacancies and job seekers. Shifts in the natural or equilibrium rate of unemployment can be identified in this way. These differences in conceptual framework can result in large differences in estimates of the natural rate – in 1985 the Groenewold and Hagger (1998) estimate is, at around 9 per cent, 2 percentage points higher than that obtained by Fahrer and Pease (1993).

Finally, we doubt that the emphasis on estimates of equilibrium unemployment or single-number estimates of demand pressure have, by themselves, much direct relevance to the deliberations of those who set monetary policy. While the equations in (8) are proposed by Gruen, Pagan and Thompson (1999) as an organising framework for discussing Australian research, there is a striking similarity between these equations and the way in which the Reserve Bank discusses inflationary prospects in its regular Statement on Monetary Policy. These presentations follow a regular pattern – first, there is a discussion of recent trends in consumer and producer prices, followed by a section on labour costs and inflation expectations, and a concluding section provides views on the inflationary outlook. Clearly, demand pressure has a role to play in this analysis, but it would appear that policy-makers are – whether formally or informally – analysing inflation using the whole system described by (8), rather than emphasising the NAIRU or SIRG that can be derived as a special case of it. In the view of the present writer this is as it should be, because useful information is necessarily lost in only considering special (equilibrium) cases of forecasting equations.

What can be concluded from Australian macro research on equilibrium unemployment? There is a general consensus that the NAIRU and other 'natural rate' measures of unemployment have risen significantly in Australia since the early 1970s. Although there is a good deal of uncertainty as to how much it has risen, it is generally believed that the extent to which aggregate demand-management can reduce unemployment below 5 or 6 per cent is limited. Other labour-market policies will be required to make significant inroads into unemployment.


Notes
1
See Caves and Krause (1984) and Gruen (1986). For more recent surveys of the Australian macro economy and policy see Grenville (1990) and Gruen and Shrestha (2000).

-199-

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The Cambridge Handbook of the Social Sciences in Australia
Table of contents

Table of contents

  • Title Page *
  • Contents v
  • Figures and Tables vii
  • Contributors x
  • Preface and Acknowledgements xviii
  • Introduction 1
  • References 13
  • Part 1 - Economics 15
  • Chapter 1 - Privatisation 17
  • References 27
  • Chapter 2 - Competition Policy and Regulation 31
  • References 40
  • Chapter 3 - Economics and the Environment 45
  • References 57
  • Chapter 4 - Health Economics 60
  • References 70
  • Chapter 5 - Immigration 74
  • References 87
  • Chapter 6 - Labour Market and Industrial Relations 94
  • References 113
  • Chapter 7 - Income Distribution and Redistribution 118
  • References 134
  • Chapter 8 - Taxation 138
  • References 148
  • Chapter 9 - Innovation 153
  • References 165
  • Chapter 10 - International Trade and Industry Policies 168
  • References 180
  • Chapter 11 - The Macro Economy 186
  • Notes 199
  • References 200
  • Chapter 12 - Money and Banking 203
  • References 216
  • Part 2 - Political Science 221
  • Chapter 13 - Political Theory 223
  • References 231
  • Chapter 14 - Federalism and the Constitution 234
  • References 246
  • Chapter 15 - Legislative Institutions 249
  • References 260
  • Chapter 16 - Political Parties and Electoral Behaviour 266
  • References 283
  • Chapter 17 - Electoral Systems 287
  • References 302
  • Chapter 18 - Gender Politics 305
  • References 319
  • Chapter 19 - Interest Groups and Social Movements 323
  • References 339
  • Chapter 20 - Environmental Policy and Politics 345
  • References 355
  • Chapter 21 - International Relations 358
  • Notes 368
  • References 369
  • Chapter 22 - Political Economy 374
  • References 391
  • Chapter 23 - Public Policy and Public Administration 406
  • References 422
  • Part 3 - Sociology 431
  • Chapter 24 - Patterns of Social Inequality 433
  • References 457
  • Chapter 25 - Families and Households 462
  • References 477
  • Chapter 26 - Gender Perspectives 480
  • References 493
  • Chapter 27 - Work and Employment 499
  • Notes 511
  • References 512
  • Chapter 28 - Crime and Deviance 518
  • References 531
  • Chapter 29 - Health and Illness 536
  • References 552
  • Chapter 30 - Population 554
  • References 569
  • Chapter 31 - Race, Ethnicity and Immigration 573
  • Notes 585
  • References 586
  • Chapter 32 - Urban and Regional Sociology 590
  • Reference 598
  • Chapter 33 - Rural Sociology 604
  • Reference 619
  • Chapter 34 - Religion and Spirituality 626
  • Reference 632
  • Chapter 35 - Cultural Studies, Australian Studies and Cultural Sociology 638
  • References 651
  • Chapter 36 - Sociological Theory 654
  • References 664
  • Chapter 37 - Social Policy and Social Welfare 666
  • References 674
  • Author Index 678
  • Subject Index 696
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