Unemployment refer to a situation where the aggregate demand for the

labour is less than the aggregate supply of labour, so that there is an

increase in the proportion of the workforce actively seeking work but who
are unable to find. Unemployment is major cost to an economy not only in
terms of the opportunity cost if lost production, but also in term of major
long term social cost including increased inequality, poverty, family
problems, crime and social division.The Australian governments have
struggles with the challenge of the achieving a sustain reduction in
unemployment. A variety of strategies have been used over the last three
decades.
Reducing unemployment in one of the most difficult task for the economy
management. Unemployment has remained stubbornly high. In Australia,
despite a range of government policies designed to attack the
unemployment problem. Even after a decade that experienced the longest
and strongest growth period on record, the unemployment rate in 2003 had
not fallen below its level at the end of the pervious business cycle in
1989. The policies a government uses to reduce unemployment will
depend upon what it sees as the main causes of the unemployment
problem. The government will stimulate a rate of economic growth that is
sufficient absorb that unemployment and the growth in the labour force,
while at the same time holding down the rate of inflation. In 1994 the
Keating Government introduces Australias first comprehensive set of
unemployment policies in half of the century, known as Working Nation
Labour Market Policy these polices consisted of labour market assistance,
apprenticeships and education and training programs. It was aim to help
the long-term unemployment to acquire new job skills and become
employable again. Late 1990s, the Howard Government reduced the fund
for labour market programs. (They think the policy was ineffective and
expensive and that most people returned to the rank of the unemployed
after their training program) the policies shifted to broader labour market
reform. They claimed that these restrictions prevent employers and
employees implementing flexible workplace arrangements that maximise
productivity. There is a multi-pronged policy approach low unemployment
rate at stimulating aggregate demand, improving productivity, and providing
low inflation, competitive and dynamic economy containing all
preconditions for high long-term economic growth.
A critical element to reducing unemployment is the maintenance of a noninflationary and steady rate of economic growth. Theis policy can contribute

to improve labour market outcome by aiming to achieve the highest

possible rate of economic growth while maintaining a low inflation
environment. Effectiveness:. these policies unlikely to reduce the structural
unemployment rate, it instead increases inflationary pressure because high
economic growth induced by technological change can result in high
structure unemployment Fiscal policy: one of the macroeconomic policies
which can influence resources allocation, redistribution income and reduce
the fluctuation of the business cycle, by varying the amount of government
spending and revenue, the government can alter the economic activity,
which will influence the economic growth, inflation, unemployment and the
external indicators in the economy. The aim of this policy is to sustainable
economic growth and unemployment rate in Australia by reducing public
sector dissaving and our reliance on overseas borrowing. The budget has
moved into fiscal deficit since the Global Financial Crisis of 2008 by the
rapid distribution money to households, known as Rudds fiscal stimulus
package therefore facilitating a sustained growth in household spending
and managing to stave off recession (two consecutive quarters of negative
growth). The unemployment rate was however increased significantly. In
2015, after recovery from the GFC through the high demand of natural
resources by the international sector the unemployment rate rose to 6%, a
sure sign of the slowing exports sector, however as the curs this rising
trend the government undergoes expansionary fiscal policy consequently, it
will be expected that no further reduction in unemployment until mid 2016,
when the effects of expansionary monetary policy is expected to have a
larger effect on stimulating growth.
Monetary Policy is macroeconomic policy which involves action by the RBA
, on behalf the government, to influence the cost and availability of money
and credit in the economy. It is used to smooth the effects of fluctuation in
the business cycle and influence the level of economic activity, output,
employment and price. Used as a long term policy aimed to keeping
inflation low, providing an environment which is attractive for investment
and employment growth. Once the RBA believe there is a stable low
inflation, which will have a greater range for reducing the interest rate in
hance to lower the unemployment rate. If the RBA feels that the level of
unemployment is approaching the natural rate, they will tighten monetary
policy to prevent excessive spending feeding into higher prices and wages.
Labour market reform is by using labour market programmes to improve
the flexibility of the labour market to reduce structural unemployment. It can
increase the labour productivity, control cost increases and improve

flexibility in the supply of the labour market. it is aim to increase labour

market productivity as an essential ingredient for long term sustainable
economic and employment growth. Structural unemployment will be
reduced by a programme of broad ranging economic reforms, including
removal of significant structural labour market impediment. Labour market
programmes are aimed to increase the ability of the unemployed to
complete effectively in the labour market. Training programmes are one of
the significant programmes which allowed the unemployed to be reemployed again and let the labour market to function more effectively and
promote a better synergy between supply and demand
However, the three limitations of monetary policy are becoming more
pronounced in recent years, particularly in its capacity to stimulate growth
or renew consumer and investment confidence: 6-9 month time lag for
monetary policy to make an impact on the economy, during which
economic conditions can change. RBA bases the cash rate off what they
predict the economy to be like in the future (MP is preemptive). This is
difficult. On top of this, some sectors of the economy respond differently
and with different readiness e.g. housing has immediate response,
whereas major business and corporations take much longer time. This can
be immensely conflicting if the economy is in a downswing, and interest
rates need to be reduced to initiate a growth. The RBA usually prioritises
economic growth and the inflation target rate and consequently lowers the
cash rate, but at the cost of creating a housing bubble. This occurs as
more borrowers are able to afford loans (lower rates), and thus demand
property, inflating prices. Implications: wealthier investors are more
competitive and thus crowd out first home buyers, and also money flowing
into homeowners is considered recycled money, and does not have a
expansive effect on the economy. However, construction will become rmore
prevalent, as houses and property are in demand, increasing employment
opportunities and thus growth. Monetary Policy targets all economic
sectors equally, thus its a blunt instrument. By increasing or decreasing the
cash rate in order to better facilitate the growth of one economic sector,
they may inadvertently harm other sectors. e.g. raising rates that may
appreciate the dollar and thus improve foreign investment will reduce
consumption and investment domestically, hurting one economic sector at
the benefit of another. Finally, its Limited Expansionary Effect. Monetary
Policy may be ineffectual if consumers and firms are initially reluctant to
invest or consume as a result of previous, negative experience with
confident spending. For example, post GFC, the savings ratio for Australia

rose greatly, resultant of the falling confidence in the economy and its
security. Hence, even a drastic fall in interest rates (2% cash rate now,
lowest ever) may not induce the expansionary effect desired, and may in
fact be detrimental as the housing bubble grows disproportionately.
Conclusively, a macroeconomic policy mix is required to maintain growth,
inflation, and unemployment within the desired bands, as together, they
effectively coordinate, whereas their individual limitations reduce their
effectiveness when used solitarily.