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Changes in labour force composition and full employment

The headlines this morning in Australia (economic policy wise) focused on the Government’s Sunday meeting where government departments in Canberra were instructed to find more spending cuts before Xmas as part of a renewed slash and burn of the Australian economy so that the Government can keep forecasting a budget surplus for the coming financial year. A few hours later, several major data releases from the Australian Bureau of Statistics came out, which showed that the Australian economy is slowing – fairly significantly. The latter clearly demonstrates the folly of the former. But try telling that to a government that preaches to us about its economic credentials yet designs and implements its major economic policy initiatives based, purely on what it perceives to be in its political best interest. It is wrong about the former and, as events turn out, will also not achieve the political capital it is aiming for. The spending cuts are causing the economy to slow, which is defeating its quest for surplus. As a result it will be damaged for “failing to keep its promise” even though that promise was the height of vandalism. That tells you how unsophisticated the policy debate and knowledge about economic matters is in this country. it is also clear that the Australian economy is a long way from full employment. So today I examine one of the arguments that the conservatives use to refute my last conclusion. I consider the argument that the increased involvement of females in the labour force over the last 30 years has pushed up the unemployment rate that we consider to be consistent with full employment to around five per cent. That claim is not tenable.

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