“Australia’s
labour market outcomes have improved in recent years but much more might be
achieved.” This is the summary judgment of one of Australia’s best
economists, Director of the Melbourne Institute, Professor John Freebairn.

Freebairn continues: “Over the past
decade, employment rose and unemployment fell, and both labour productivity and
real wages increased. Also, the labour market has arguably become more flexible
and capable of responding to change. Yet labour-force participation is low by
international comparison, the headline unemployment rate misses the
underemployed and disguised unemployed, and Australian labour productivity and
real wages remain some distance below world best
practice.”

This article appeared in the Weekend
AFR. It is a good summary of a lot of accumulated research and good judgment. Freebairn has told Henry that he believes the real rate of unemployment –
allowing for early unwelcome retirement, people on disability pensions who could
work, people working less than they’d like – is nearer 15% of the potential
workforce rather than the 5% officially recognised.

Serious reform to Australia’s tax and welfare system is
the area where “much more might be achieved.” Anyone for a powerful new year’s
resolution?

And in response to comments made by
Lindsay Tanner last year, Henry writes on the unemployment and welfare problem
here.