Employment volatility and the great moderation: Evidence from the Australian states and territories

Macroeconomic policy discussion in Australia presumes that there was once and for all reduction in the volatility of aggregate output and employment in the late 80s or early-mid 90s and that all states and territories were party to this 'Great Moderation'. In this paper we examine Australian data on national and state and territory employment, focusing in particular on whether there have been common national and state and territory changes in the volatility of employment growth. We find that there was no change in volatility for SA, WA and the ACT while there was a change in volatility, associated with 'the great moderation' in the early-mid 1990s for NSW, VIC, QLD, TAS and the NT. The different experiences of the states and territories signals the need for more, and more evidence-led, discussion in Australia of the regional aspects of macroeconomic stabilisation policy