The Australian economy will remain sluggish for at least the next 18 months, and growth will be slow, according to a senior Treasury bureaucrat.
In a speech to the Australian Business Economists (ABE) conference in Sydney, Treasury director of the Domestic Macroeconomic Group Dr David Gruen, said that the underemployment issue could be masking a higher unemployment rate; with employers cutting hours not jobs during the financial crisis.
“The unemployment signal is underestimating the amount of slack in the economy, simply because employers have been able to cut hours rather than jobs,” he said.
He added that even if the economy experienced above trend growth next year, it would take time to bridge the gap between GDP growth and trend growth of three percent.
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