Labour market reform and the macroeconomic efficiency of the labour market in Australia

This paper assesses the effects of a decade and a half of labour market reform in Australia on labour market flexibility at the macroeconomic level. Increased labour market flexibility is interpreted as reduced structural unemployment and enhanced efficiency of matching. We use shifts in the Beveridge Curve as a measure of changes in labour market efficiency (following Solow, R., What is labour-market flexibility? What is it good for?, Keynes Lecture, British Academy, London, December, 1997). Time series analysis of unemployment, vacancies and other relevant variables strongly suggests that changes in the efficiency of labour market matching over the period reflect the cyclical effects of hysteresis rather than the effects of labour market reform.