The Labour Market, Structural Change and Recent Economic Developments
It is a pleasure to be in Hobart today and I would very much like to thank Finsia forthe invitation to this lunch.My remarks this afternoon are largely centred on the Australian labour market. Theypick up on two important issues. The first is one that the Reserve Bank has spokenabout at length over recent years, and that is structural change. Today, I would like tofocus on how this change has been affecting the operation of the Australian labourmarket. The second issue is a more timely one, and that is how recent developmentsin the labour market can help us better understand the current balance between supplyand demand in the economy.
No doubt, you have all heard much discussion over recent times about structuralchange in Australia, and why it is occurring. At the centre of a number of the changesthat are taking place is the industrialisation and growth of Asia. This has resulted inhigh prices for Australia’s commodity and food exports, as well as a high exchangerate. The most obvious effect is the rapid expansion of the resources sector that hasbeen underway for some time. Another important factor has been the marked changein Australians’ propensity to borrow to buy assets, especially houses. And then thereis the ongoing growth in our demand for services as our incomes grow and thepopulation ages. Just as other forces have done so for more than 200 years, theseforces are reshaping our economy.But the concept of structural change – which is talked about a lot by economists – is afairly abstract one for many people. It does become very real though when it affectspeople’s jobs – the nature of their work, the industries they are employed in, thesecurity of their employment, their career opportunities and the wages they get paid.The Reserve Bank must, by the nature of our responsibilities, focus primarily onaggregate outcomes. However, we also try to understand what is going on beneaththese aggregates, and how people’s lives are being affected.Before I talk about the detail, it is worth starting with the aggregate unemploymentrate (Graph 1). The key point here is that unemployment remains low. In the past30 years, there have only been four years in which the unemployment rate hasaveraged below its current 5¼ per cent. Australia has one of the lowestunemployment rates among the advanced economies, an outcome that seemedimprobable for much of my professional career.
I would like to thank Patrick D’Arcy for his valuable assistance in the preparation of this talk.