Achieving full employment : some lessons from the Australian experience

High unemployment in most OECD countries seems intractable. The reduction of unemployment rate to an acceptable level requires a growth rate of the economy well in access of the current rate. However, policy makers are uneasy of pursuing an expansionary policy for the fear of igniting inflationary pressure. This paper argues that the preoccupation with low inflation and fiscal prudence is the outcome of globalisation, and has the effect of producing high unemployment as a means of disciplining labour in the interest of global capital. It also argues that in the absence of growth promoting macroeconomic policies, neither labour market programmes nor labour market deregulation are likely to make any dent on the unemployment rate. Using the Australian example, this paper contends that a consensual incomes policy is capable of raising the economic speed limit and thereby reduce unemployment without igniting inflationary pressure.