RDP 8303: The 1930's and the 1980's: Some Facts 1. Introduction

After fluctuating in the range from 3 to 6 per cent between 1910 and 1929, the rate of unemployment reached 20 per cent (almost 30 per cent amongst trade unionists) in 1932. Unemployment did not subsequently fall much below 10 per cent until the Second World War. During the past decade the unemployment rate has moved in two major steps from around 1–1/2 per cent to over 10 per cent. Graph 1 puts current experience into a long-term perspective.

On most criteria, the economic devastation of the 1930's was far more serious than anything experienced in the current episode. However, for many individuals, and especially perhaps in relation to the expectations built up in the earlier period, the recent deterioration may in some relative sense be on a similar scale.

This paper compares the main economic developments leading to and resulting from the high rates of unemployment in the 1930's and the 1980's. Developments in the world economy, in economic policies in Australia and in the main economic aggregates are examined. The statistics, particularly in the 1930's, are imperfect, and only a thumbnail sketch can be offered here. The references listed at the end of the paper provide a wealth of detail and interpretation.

The data in this paper are largely presented in the form of graphs. Mostly there is a comparison of data for two fifteen year periods – from 1921/22 to 1935/36 and from 1971/72 to 1985/86. The latter period, of course, is partly in the future. The figures for 1983/84 to 1985/86 are taken, from the projections presented to the National Economic Summit.^[1] While these data are only illustrative of one out of a large number of possible sets of developments, in one fundamental aspect the projections parallel earlier experience – the unemployment rate is assumed to remain high after the sharp lift in recent years.^[2]

Footnotes

The figures used are those from the so-called “Scenario A”. In presenting the Scenarios, the Treasurer stressed that they were not forecasts and that “surprises will inevitably occur”. The figures from Scenario A, however, provide a set of numbers which indicate one way in which economic developments might unfold in the next three years. [1]

“Scenario C” assumed slightly lower unemployment while “Scenario B” assumed that unemployment would be noticeably higher than in Scenario A (peaking at 12.2 per cent in 1985/86). The uncertainties involved are illustrated by projections for the rate of unemployment. The average rate of unemployment projected for 1983/84 in Scenario A is 10 per cent. Another recent set of projections (by Blandy and Harrison (1983)), suggest that the rate of unemployment might be as low as 11 per cent or as high as 14 per cent in December 1983. [2]