Impact Of Unemployment, Inflation And Economic Growth

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Australian Unemployment, Inflation, and Economic Growth
The Australian government faces a number of formidable issues and challenges in achieving strong, sustainable economic growth. These issues have influenced the Australian economy significantly over time and include unemployment, inflation and external stability which all have had a direct impact to the economic growth and prosperity of Australia. Fortunately there has been a number of policy responses which include macro and micro economic policies and implementations over time to combat and provide a solution to these problems.
Traditionally economic growth has been regarded as the most important objective for economic management. Economic growth can be defined as an increase in a country …show more content…

Unemployment refers to a situation to which where individuals are unable to find a job but are actively seeking employment. Unemployment is a major cost to an economy, because it results in the opportunity cost of lost production, as well as increased social welfare payments and a loss of taxation revenue. It also restricts domestic output and growth and has many detrimental social costs which include a loss of skills and family household tensions. In recent years sustained economic growth has been the best way to achieve a lasting fall in unemployment. When economic growth is strong, there is usually an increase in aggregate demand (AD) which means there are more employment opportunities and more resources will be needed to cope with the demand. The annual Federal Budget for 2010-11 just recently forecasted economic growth of 2% this financial year showing that Australia has well truly escaped the GFC. Consequently, unemployment is also expected to fall to 4.75% in 2011-12 from a current figure of 5.3% for the March quarter this year. Australia has been able to keep unemployment at a relatively low rate of 5-6% which is significantly lower than the OECD 's average. The RBA is also predicting growth rates between 3.25% and 3.5% in both 2010 and 2011. According to Okun 's law, unemployment will fall if the economic growth rate is greater than increases in population of the labor force and productivity growth (Trading

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