The Relationship Between Output Growth and Unemployment: A Re‐examination of Okun's Law in Australia

Abstract In this article, we investigate the questions of whether some form of Okun's Law holds for Australia, and if so whether the Okun relationship has been stable. The results indicate that alternative formulations of the ‘law’ do not give rise to numerically similar parameter estimates. Nevertheless, one of these formulations yields estimates which appear to be both plausible and consistent with results from previous analyses. This particular formulation suggests that Okun's relationship in Australia underwent a structural change around 1974. The parameter estimates obtained can be regarded as rules of thumb which may be useful in discussing broad consequences of policy actions.