Australia: Selected Issues

IMF Staff Country Reports, February 9, 2017

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This Selected Issues paper examines the adjustment of Australian labor markets to the recent adverse shocks.
Australia’s labor markets were not severely impacted by the global financial crisis and are adjusting smoothly to the sizeable commodity prices bust and mining investment downturn.
However, some labor market indicators suggest persistent weaknesses.
There does not appear to be a significant increase in structural employment in the wake of the commodity prices bust and mining investment decline.
Increased flexibility in average hours per worker has likely moderated employment reduction in downturns and prevented a larger increase in unemployment in the wake of the mining investment downturn.
At the same time, elevated underemployment signals additional slack, and is likely weighing down wage growth.

Adjustment dynamics of labor markets following commodity prices bust and mining investment downturn.
Role of average hours per worker flexibility in moderating employment reductions.
Evidence does not point to a significant increase in structural unemployment following the downturn.
Elevated underemployment as an indicator of additional labor market slack.
Implications for wage growth given persistent underemployment.

Monitoring underemployment is important for assessing labor market slack and its effect on wage growth.
Labor market flexibility in hours worked has been a key buffer against larger rises in unemployment during the mining investment downturn.
No explicit policy prescriptions are listed on the page, but the analysis highlights areas (underemployment, hours flexibility, structural employment) relevant for labor and macroeconomic policy.