“Australia has one of the lowest unemployment rates in the developed world.” – Finance minister Penny Wong, The Drum opinion article, 14 January.
Several ministers, including finance minister Penny Wong and former treasurer Wayne Swan, have made this claim repeatedly to promote the economic credentials of the government.
But opposition senator Arthur Sinodinos insists the government continues to “peddle” a “line” about unemployment.
In a recent media release entitled “Labor’s dishonesty on unemployment rate continues”, Sinodinos said Wong and Swan “refuse to confront the facts when it comes to how Australia’s unemployment rate compares to developed economies”. He says Australia’s current unemployment rate of 5.5% is above eight other developed nations – Japan 4.1%, Austria 4.9%, Norway 3.7%, Switzerland 3.1%, Singapore 1.9%, South Korea 3.2%, Taiwan 4.2% and Hong Kong 3.5%.
So who’s right?
Sinodinos' source is the June edition of The Economist magazine, which lists 42 countries' unemployment rates. It includes a mix of developed and important developing economies such as China, Egypt, and Thailand.
The Economist list gives an indication of how Australia stands internationally, but if you really want to compare apples with apples you need to go to the Organisation for Economic Co-operation and Development (OECD) – an organisation of developed countries.
It lists unemployment rates in its statistical publications. It is “standardised”, meaning some attempt has been made to correct the data for comparison across countries.
Of 34 OECD countries, there were seven OECD member nations with lower unemployment rates than Australia in December 2012 – Austria, Iceland, Japan, South Korea, Mexico, Norway and Switzerland. Germany and Luxembourg had the same rate of 5.4%.
(I have chosen December 2012 because it is the latest data we have to compare all countries. Using the most recent figures would make little difference to the comparison.)
The unemployment rates of 34 OECD economies. Author/OECD
So Australia’s unemployment rate is the equal 8th lowest out of 34 countries in the OECD. Is that “one of the lowest unemployment rates”? I would argue that it’s a reasonable statement.
It is also worth noting that unemployment is only one indicator of the economy’s performance. Japan, for example, has a lower unemployment rate than Australia, but it would be hard to argue that its economy is performing better given its problems with debt and slow growth.
Verdict
The statement is true. Australia’s unemployment rate is one of the lowest in the developed world.
Review
Australia does have a relatively low rate of unemployment compared to other developed countries.
In the March 2013 OECD data Australia’s rate of unemployment was 5.6%, the average for the seven major countries is 7.3% and the average for the whole OECD is 8.0%. Whether having a relatively low rate of unemployment translates into “one of the lowest unemployment rates” probably depends on how you interpret the words “one of the lowest”.
But it does seem reasonable in this case, given Australia’s unemployment rate is in the lowest 25% amongst OECD countries. Of course, this is just about the fact that Australia has a low rate of unemployment – it not saying anything about how that has come about. – Jeff Borland.
Mark Crosby
Associate Professor of Economics at Melbourne Business School
Mark Crosby joined Melbourne Business School in January 2003. He is currently an Associate Professor in the School, Associate Dean (International) and Director of the School’s Executive MBA program.
Prior to joining MBS Mark worked as an academic at the University of Melbourne, the University of New South Wales, and at the University of Toronto, and as a Research Officer at the Australian Treasury in Canberra.
His academic interests are in international macroeconomics, with particular interest in policy issues in the Australian and Asian regions. His published research has covered topics such as the role of exchange rates in affecting macroeconomic fluctuations, the impact of macroeconomic factors on election outcomes, and the properties of business cycles.
Mark has acted as a consultant to the Hong Kong Monetary Authority and to the Monetary Authority of Singapore on a number of projects since 1998, and he has an ongoing Research Fellowship position at the HKMA. He also consults widely to business and government both in Australia and overseas. His most recent consultancies have examined policies for diversifying Brunei’s economy, and policy issues related to South Africa’s increasing current account deficit.
Mark is also a regular contributor to the Australian Financial Review and The Age newspapers, and he is a sought after public speaker on matters relating to the macroeconomy.
This article was reproduced with permission from The Conversation
