Australia in Better Shape Than Europe

Letter

Australian Financial Review

26th June 2006

While noting that the Organisation for Economic Development's OECD's Employment Outlook for 2006 appears to support Opposition Leader Kim Beazley in his attack on Work Choices, Alan Mitchell rightly points out that the Outlook "abstracts from the interaction between labour market policies and macro-economic policies and conditions" ("OECD and the Beazley line", Opinion, June 21).

Some European countries with regulated labour markets and relatively low official unemployment rates have, for example, pursued budgetary policies that provide subsidised employment and/ or shift unemployed on to welfare. But the cost is higher taxation.

Examination of data in the Outlook shows that, while six small European countries have lower unemployment rates (mostly only slightly lower) than Australia, the average 2005 rate for OECD Europe was 75% higher than Australia's and is projected to be 80% higher this calendar year. Moreover, while our current unemployment rate is now 60% lower than our average rate for 1993-2003, OECD Europe's average has fallen only marginally.

Importantly, Australia also has a much higher proportion of its working age population employed than Europe.

The Employment Outlook's questioning of the potential benefits from some forms of reduced regulation needs to be considered against this broader background.

When it is, it is difficult to escape the conclusion that, overall, Europe still suffers both economically and socially from the direct and indirect effects of heavy regulation of the labour market.