HSC · Topic explainer
How to use the NAIRU in HSC Economics
The NAIRU is an estimate of the unemployment rate consistent with stable inflation, other things equal. Compare the actual rate with the estimate to discuss labour-market pressures. A rate above the estimate can indicate spare capacity. The estimate is uncertain and can shift with the structure of the labour market.
Worked example
Assume the NAIRU is estimated at 4.5% and actual unemployment is 5.8%. Actual unemployment is 1.3 percentage points above the estimate. Weak aggregate demand could explain some of the gap if employers have fewer vacancies or reduce hiring.
To explain a lower NAIRU over time, give a policy that can improve how workers match to available jobs, such as training for persistent skill shortages. Explain the link from improved matching to lower structural unemployment. Use the estimate as one piece of evidence alongside participation, wages and other indicators.
Official exam practice
Find other years and marking guidance in the Economics official exam archive.
Further reading. NESA 2025 Economics marking feedback