Australia's unemployment rate has been hovering near 4 per cent — a level that would have been considered remarkable by the standards of any decade from the 1970s through to the 2010s. Politicians have been quick to claim credit for achieving "full employment." But what does that term actually mean, and does the current data justify the label?
The NAIRU Concept
Economists use the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU) — the level of unemployment below which inflation begins to rise, because the labour market is so tight that workers can demand wage increases that businesses pass on as price rises. Estimates of Australia's NAIRU have shifted over time. The RBA currently estimates it at around 4.0–4.5 per cent, which means the current unemployment rate is either at or just below the level consistent with stable inflation.
Underemployment: The Hidden Story
The unemployment rate counts only those who have no paid work but are actively looking. It misses the underemployed: workers who have some work but want more hours. Australia's underemployment rate has been running at around 6.5–7 per cent, meaning the total "labour underutilisation" rate — unemployment plus underemployment — is closer to 10–11 per cent. For many Australians, particularly those in part-time or casual work, the labour market feels considerably less tight than the headline unemployment figure suggests.
Participation Rate Records
One genuinely remarkable feature of the current labour market is the participation rate — the share of the working-age population either employed or actively looking for work. This has reached record highs, particularly among women and older workers. More Australians are in or seeking work than at any previous point in history, which is a structural achievement that goes beyond the cyclical tightness of the current moment.
