Over the past two decades, there has been a marked divergence in regional labour market outcomes within Australia. This paper presents a brief review of the recent literature on regional economic conditions in Australia and defines what the authors mean by a 'region'. The authors then illustrate some of the stylised facts about regional labour markets between the census years of 1986 and 1996. They show that employment growth was highly dispersed during this period. They also show that regional employment growth was often not inversely related to changes in unemployment rates, as tends to be the case in national and state economies, because of significant variations in the strength of regional migration. Using a new and comprehensive regional database that draws on data from both the census and government departments, the authors then identify the economic characteristics of regions. They use logit models to establish the significant characteristics of those regions that have experienced large changes in employment and large migration flows. Finally, the key drivers of regional disparities in performance are assessed.