The theme of this Policy Forum is ‘Full Employment
in Australia’. One of the main questions
to be considered is whether we are already
at full employment, or whether we can further
reduce unemployment and underemployment.
The unemployment rate, at 4.3 per cent seasonally
adjusted (May 2008), is low by the standards
of the past three decades, but still above
the levels of the 1950s and 1960s. McDonald
(2007) argues that the unemployment rate can
be further reduced to 2.5 per cent before Australia
is at full employment. In this article, we
leave the question ofwhether Australia is at full
employment or not to others in this Forum, and instead focus our attention on the contention that skills shortages are a constraint on further increasing employment in Australia.