The natural unemployment rate in Australia since the seventies

The natural rate of unemployment is calculated based on Lilien's (1982) not ion that an increase in the sectoral dispersion of demand results in a rise in unemployment for a given level of aggregate demand. In contrast to earl ier applications, the dispersion measure is based on sectoral employment gr owth rates purged of aggregate influences using a VAR model. We find that m ost of the rise in unemployment im Australia since the 1970s reflects the i ncrease in the underlying natural rate. This finding is broadly consistent with Lilien's results for the US as well as earlier results for Australia a nd Canada.