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Recent and forthcoming studies of the relationship between output and employment have used a demand-determined model in which desired employment is a function of output and with actual employment determined by linking such a relationship with a dynamic adjustment mechanism. The present article is a further study of such a model but is oriented to a country of fast industrial and population growth, Australia. The results obtained are interpreted in the light of the new specification of the relationship advanced by economists N.J. Ireland and D.J. Smyth. The employment functions that authors have fitted to Australian manufacturing appear to produce reasonably sensible results and some interesting comparisons with previous studies. But authors must stress the difficulties and limitations of this form of analysis. First, there is the problem of identifying a demand relationship and in this study there is no way of ascertaining if authors achieved this. Secondly, there are statistical problems, arising principally through multicollinearity and the use of a distributed lag model. Finally, there are problems of interpretation, for instance, the distinction between returns to scale and returns to labor and between shifts in capital and shifts in technology.

The article focuses on issues related to economic effects of the Australian tariff. There is analysis of the Australian Tariff Committee's report on tariff and free trade theory. Professor Jacob Viner states that free trade theory had not attempted to face certain questions relevant to the application of protection to a country with resources like those of Australia. Economist Alfred Marshall's analysis of the laws of increasing and decreasing returns upon the fiscal policy is of special interest to Australia. It is viewed that the export industries have to bear most of the tariff burden. It is observed that the greatest expansion of employment in the primary industries is in dairying and sugar which have benefited substantially from the tariff. An analysis of the relation of the increase in employment to tariff assistance for manufacturing sustains the conclusion that those industries which have received the greatest protection are those in which the expansion has been most pronounced.

The article evaluates the work of the wages board based on the impact of the mode of wage regulation on the prosperity and welfare of the people in Australia. It is not possible to show by means of statistics what effect the determinations of wages boards have had upon wages. The most serious charge brought against the method of regulating wages by wages boards is that it leads to unemployment to minimum wage earners. A mode of wage regulation would have important consequences in industrial development. For many trades the wages board is the beginning of organization. The final test of the success of any legislative experiment made by self-governing people is the degree of satisfaction which these laws afford to those who are responsible for their enactment and enforcement.

1971 will go on record as the year in which the general public in Australia began to worry about cost inflation or income inflation as I prefer to describe it. This concern was expressed clearly in the Commonwealth Treasurer's budget speech; unfortunately the action taken in the budget did not correspond, for it was aimed at further restraint of demand which was already sagging below the level of full employment. In public discussion it is now understood that the 1971 variety of inflation is significantly different from previous bouts, in that this time the general level ot5 demand, profits, and activity are not very high as they have been on previous occasions pulling prices up. Indeed the use of the term "stagflation" to describe the 1971 situation is becoming common to indicate the combination of a stagnant level of activity combined with a rapid rise of prices. [ABSTRACT FROM AUTHOR]