dp23dwayne said:
Does anyone also know how 33 year lows of unemployment has made inflation to remain constrained?
Sure thing, I answered something similar to this quite recently.
The most likely explanation is that the fall in unemployment over the past decade has been slow, allowing the economy more time to absorb new workers without gaining inflationary pressure. Additionally, changes to Australia's labour market have made it more difficult for workers to secure wage rises without productivity increases, while increased competetive pressures have reduced the ability of businesses to raise prices. These changes, in combination with other structural reforms, may have reduced Australia's incidence of structural unemployment and hence reduced the NAIRU, which was assumed to be 6.6% in 2002, but has now been reduced much lower, closer to our unemployment levels today, which could indicate that Australia is running at full employment (i.e. no cyclical unemployment) Which means that continued strength in domestic demand will only create inflationary pressures without contributing to further reductions in the unemployment rate.
