Canada and Australia have a great deal in common, from Queen Elizabeth II to commodity exports. Like Canada, Australia is also concerned about youth unemployment. Australia’s record on youth unemployment, however, is far stronger than Canada’s.
It was not always this way. Going back 10-20 years, the unemployment rates for those aged 15-24 tracked closely between Australia and Canada. In the period from April 1993 to March 2002, the youth unemployment rate in both countries averaged 14.7%:
The youth unemployment rates fell in both countries as commodity prices rose, which is not surprising as both are net exporters of commodities. However, the youth unemployment rate fell much faster in Australia, reaching a low of 8.7%, while Canada’s best performance was a rate of 10.9% in August, 2008.
Youth in Canada were hit much harder by the financial crisis, with youth unemployment peaking at 16.4%, compared to 12% in Australia. Canada has recovered somewhat since then, with a March 2013 rate of 14.2%, while Australia has hovered between 11% and 12%. The gap between Canadian and Australia youth unemployment rates is closing, but is still over 2 percentage points:
This difference is truly puzzling, as historically the two economies (and their youth unemployment rates) have tracked each other closely. Yet Canadians are not benefiting nearly as much as Australians from a decade-long rise in commodity prices. The difference cannot be explained by an outbreak of Dutch Disease in Canada, as the Australian dollar has appreciated faster than the Canadian dollar over the last decade.
Australians are right to be concerned about the rate of youth unemployment in their country. However, a 12% unemployment rate for those aged 15-24 is a problem that Canada would love to have.
Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business.