Potential Growth and Inflation: Estimates for Australia, the United States and Canada

13 Pages Posted: 30 Mar 2004

See all articles by Mardi Dungey

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

John Pitchford

Australian National University (ANU) - School of Economics

Abstract

Estimates of potential output growth for Australia, the United States and Canada are presented and analysed in this article. We define potential growth as that growth rate consistent with a steady (domestic component of the) inflation rate (SIRG). At around 4 per cent per annum, Australia's SIRG has been relatively stable for the past 30 years, which seems inconsistent with the view that wide-ranging microeconomic reform in the 1990s raised growth potential. However, we show that the reduction in employment growth in Australia from the 1980s to the 1990s may account for the absence of a rise in potential growth. In Canada and the United States the SIRGs are closer to 3 per cent, and we explore the reasons why potential growth estimates are higher for Australia than for North America. We also discuss why Australia's growth averaged less than its potential in the 1980s and 1990s and the possible use of our estimates for monetary policy purposes.

Suggested Citation

Dungey, Mardi and Pitchford, John, Potential Growth and Inflation: Estimates for Australia, the United States and Canada. Available at SSRN: https://ssrn.com/abstract=524267

Mardi Dungey (Contact Author)

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.dungey.bigpondhosting.com

John Pitchford

Australian National University (ANU) - School of Economics ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia

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