Paper uses Okun’s Law to assess Australian potential output
Suggests potential output growth has fallen from around 5% in 1970s to 2.9% now
Potential output growth in Australia has fallen from around 5% in the 1970s to 2.9% in 2015, according to estimates in a discussion paper published by the Reserve Bank of Australia.
In Okun's law and potential output, David Lancaster and Peter Tulip uses the law – which refers to the correlation observed between the unemployment rate and real GDP – to estimate both potential output growth and unemployment.
The authors say their estimates of potential output growth "are imprecise" and fluctuate
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