The Natural Rate of Unemployment in Australia
Melbourne Institute Working Paper No. 07/97
Date: May 1997
This paper has two principal objectives: i) to discuss the empirical and conceptual strength of natural rate theory; and ii) to describe and review several methods of estimating the natural rate of unemployment in Australia. Three general criticisms of natural rate theory are outlined, and some policy implications are examined. The methods of estimating the natural rate of unemployment are shown to yield imprecise and substantially divergent estimates which display little practical value in policy formulation.