Problem with Philips Curve (1 Viewer)

[Kieran95]

Can someone please explain to me why both unemployment and inflation are currently low, when the phillips curve argues that this isn't possible? I ask because i was talking about the Phillips Curve in my trial essay but the marker said to "Analyse WHY they are currently both low".

Thanks in advance..

 

[deswa1]

The Phillips Curve is really just an empirical observation- in fact Australian experience tends to suggest that the Australian economy doesn't really fit the layout of the Phillips Curve (note also stuff like in the 70/80's where both inflation and unemployment was high).

As for reasons, you could argue stuff like effective macroeconomic management has kept inflation low whilst strong economic growth over the past twenty say years has seen unemployment fall etc

 

[RishBonjour]

The philips curve doesn't always apply, some new zealand guy (I think - check wikipedia if you want to know) just made it because he say a PATTERN in unemployment and inflation level.
e.g. stagflation crap of the 1970s or something.

I think currently, our economy is growing yess, unemployment is low, yes, inflation is low, yes. Mainly, if the read the RBA's statements, it has to do with Australia's so called "patchwork economy". NT/WA are growing a lot (8% year on from March) and their unemployment rates are quite low too, but in NSW and stuff, its a different story, particularly, Australia's retail sector, stuggling haaaaaard, hence inflation has been low.
So national account figures make it look all pretty, but it actually isn't that great.

I feel like I'm missing a major thing, ill edit my post when It comes back to me.

 

[RishBonjour]

shiz deswaaa, posted at same time

edit: cute raccoon btw.

 

[Bored_of_HSC]

Wouldn't also the success have to do with the extensive hawke/keating mirco reforms of the 80's/90's? It may seem far fetched but micro is essential for improving AS in the long-term and thus maintaining both low unemployment + inflation.

Point in case: Australia saw a resurge in inflation in 2007 after these reforms stopped being as effective (and at the peak of growth tbf).

 

[freeeeee]

employment is not low, unemployment is low at 5.1% which means employment is high. ~5% unemployment is ideally around the NAIRU.
The Philips curve is in the shape of a hyperbola in the first quadrant, with unemployment on x-axis, inflation y-axis
Inflation and unemployment in Australia are both currently low, so graphically it is on like the centre point (length wise) on that curve

 

[Kieran95]

employment is not low, unemployment is low at 5.1% which means employment is high. ~5% unemployment is ideally around the NAIRU.
The Philips curve is in the shape of a hyperbola in the first quadrant, with unemployment on x-axis, inflation y-axis
Inflation and unemployment in Australia are both currently low, so graphically it is on like the centre point (length wise) on that curve

Apologies, that was a typo :/