Regional employment growth and the persistence of regional unemployment disparities
William Mitchell and Ellen Carlson
Centre of Full Employment and Equity, University of Newcastle
Contact Email:   ecwfmalinga.newcastle.edu.au

A contested issue in regional economic debate concerns the relative importance of regional-specific versus macroeconomic factors in determining regional employment outcomes. The theoretical impasse is evident in regional development policy. The current Australian Federal Government, consistent with its neo-liberal leanings, has eschewed both stimulatory macro policy and specific regional policy. Its broad macroeconomic policy settings (low inflation with fiscal restraint) aim to create a macro environment where market incentives to entrepreneurship drive economic growth. Supplementary microeconomic reforms (labour and welfare) then aim to stimulate individual effort. This strategy is not convincing. Tight macro policy has sustained high unemployment and mobility patterns and relative wage movements have not promoted regional convergence. Wide regional unemployment disparities persist.

Using data for Australia’s 64 Statistical Regions, this paper examines the cyclical responsiveness of regional employment growth and unemployment to changes in national economic activity. It examines the persistence of regional unemployment differentials and whether the relative position of regions changes over the course of the business cycle.

The research findings have important implications for policy. The nature of employment growth and unemployment persistence across regions will indicate whether a focus on macroeconomic policy is justified or whether more regionally-specific policies are warranted.

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