Glenn Stevens: Inflation targeting - a decade of Australian experience1
Address by Mr Glenn Stevens, Deputy Governor of the Reserve Bank of Australia, to South Australian
Centre for Economic Studies April 2003 Economic Briefing, Adelaide, 10 April 2003.
* * *
It is a pleasure to be here in Adelaide to take part in this Economic Briefing.
As the title of this address makes clear, I would like to look back over a decade of experience using an
inflation target for monetary policy in Australia. Just a couple of weeks ago saw the tenth anniversary
of a speech by Bernie Fraser, then Governor of the Reserve Bank, in which the outlines of our target
can be seen.2 It was, admittedly, a tentative beginning - there was no drum roll, or breathless talk of a
new era. A reasonably careful reading of that speech was (and is) needed to see the contours of the
approach to monetary policy which was being developed, and the framework was not fully formalised
until the 1996 Statement on the Conduct of Monetary Policy.3 It is perhaps for this reason that some
commentators believe that inflation targeting in Australia in fact began much later.
But those who were there at the time - as I was - saw the material in that and a couple of other
speeches of the period as quite significant, in that it associated intent of policy with numerical
objectives for inflation, even if only fairly broadly defined ones. The behaviour of policy over the
ensuing years was, moreover, quite consistent with those ideas. Hence I remain happy to claim that
inflation targeting in Australia began about ten years ago in the first half of 1993.
So it is appropriate to mark the occasion with a look back at how inflation targeting has worked as a
system. This is not the first review I have done - I drew some initial conclusions in 1999 after six years
of experience.4 But we now have four more years experience - four fairly eventful years - so we can
refine our conclusions.
I shall argue that inflation targeting has been a success, on several criteria. It remains, in my
judgement, the best model available for Australia. But it is not enough to look backward. It is only
fitting that we consider the capacity of this framework to adapt to changing circumstances in the years
ahead. I argue that it will be an adaptable system - though to meet some of the challenges may
require even more emphasis on the medium-term nature of the target which has been a hallmark (and
a strength) of the Australian approach thus far.
Why Inflation Targeting?
First, some history. Graph 1 shows a long-run series for inflation in Australia, beginning in the mid
1950s. The post-World War II era was the time when persistently rising prices became a normal
feature of economic life. Prior to that, there had been periods of inflation followed by periods of
deflation, with relatively little drift in the price level over long periods. Through the 1950s, Australia had
positive inflation, but it was quite low on average, even if rather variable. This was also the case
through the first half of the 1960s.
By the end of the 1960s, it had become clear that, not only did prices always rise, but the rate of
increase was getting larger. Inflation was trending higher, and this continued in the 1970s. As Ian
Macfarlane has pointed out, Australian inflation was already at 10 per cent when the OPEC I rise in oil
prices in late 1973 pushed global inflation up to levels rarely seen before. Australia's inflation reached
171⁄2 per cent. It did decline thereafter, but by the end of the 1970s, was still running at about 10 per
cent.
Following the recession of 1982-83, inflation fell to about 5 per cent, but quickly rose again as the
recovery proceeded. Things were not helped by the large depreciation of the currency in 1985 and
1986, which pushed down the trade-weighted value of the Australian dollar by nearly 40 per cent in
eighteen months. This was quite inflationary, given that a background environment of high inflation
and relatively uncompetitive markets meant that price rises resulting from the exchange rate fall could
be fairly easily passed on, quite unlike the situation we have seen in recent years.
The depreciation could have been more inflationary, had it not been for the Prices and Incomes
Accord in place at the time. This framework allowed for wage claims under the highly centralised
system then in operation to be 'discounted' for the estimated impact on the CPI of the depreciation.
This was helpful in containing second-round impacts of the exchange rate change. More generally, the
Accord framework provided for a reduction in real wages and lower inflation than would probably
otherwise have accompanied the strong growth experienced through most of the second half of the
1980s.
Even so, by the end of the 1980s, Australia had experienced a period of two decades during which the
rate of CPI inflation averaged 9 per cent. Not surprisingly, an inflation psychology was well and truly
ingrained in the Australian community. Measures of inflation expectations showed them to be in
double digits. The financial advice to a whole generation of Australians presumed that high inflation -
with the incentives for tax-effective leverage that it produced - would be a permanent feature of
economic life. Some people used to calculate the half-life of a dollar (about eight years) as a way of
illustrating the erosion of the value of money. Another way of putting it was that a dollar in 1970 had
purchasing power of 17 cents by 1990.5
Through all this, various monetary policy frameworks had proven unsatisfactory. We had monetary
targeting for about a decade, but targets were hard to hit in the regulated era, and even harder to hit
after financial liberalisation, so that there was doubt about the role of money as an intermediate
objective. We couldn't rely on the exchange rate as an anchor, because we didn't have the sort of
domestic structural flexibility consistent with a pegged currency, particularly given the nature and size
of the external shocks which hit the Australian economy. And a policy of completely unconstrained
discretion lacked credibility precisely because there had been two decades of high inflation.
So when inflation came down during the aftermath of the recession in the early 1990s, to rates which
were lower than anything seen since the 1960s, the question was how to take advantage of the
opportunity to lock in low inflation as economic growth recovered.
Around the world, some countries were looking at a model in which there was no intermediate goal,
like a monetary target, nor an operational goal, like a pegged exchange rate, but a numerical target for
the final goal, namely inflation, combined with discretion to vary the policy instrument in pursuit of that
goal.
In the New Zealand case, the attraction of inflation targeting was based as much on management and
governance considerations as on the niceties of monetary theory: the thinking was that inflation was
the variable for which the central bank should be accountable, so make it explicitly part of a formal
agreement between the Governor and the relevant Minister.6 Canada had its own slightly different
conditions, as did the United Kingdom. What they all had in common was a relatively unsatisfactory
history as far as inflation control was concerned.
It is no secret that the RBA had some reservations about the new approach. We felt that the very low
target numbers and, more importantly, the quite narrow target bands espoused in some countries
would prove too demanding in Australia (and probably elsewhere too). Nonetheless, the idea of
articulating the goals of policy in terms of the ultimate objective made a lot of common sense. And we
felt that having achieved low inflation, articulating a policy of keeping it low and behaving consistently
with that stated policy did offer the prospect of combining a measure of price stability and good growth
(which was, after all, expected to be one of the benefits of having price stability).
Why '2 to 3'?
How did we come up with the particular formulation of '2 to 3 per cent, on average'? To be frank, this
was to some extent serendipitous. We were already in that neighbourhood, with inflation down to
about 2 per cent by 1992. When we looked around at the best performances on inflation, we saw first
that no-one had managed to keep inflation within a very narrow band for long, and second, that the
best average performances since World War II were in the 'two point something' region, with quite a
wide degree of variation around that average.7
par
We formed the judgement that the Bundesbank, which was the inflation-fighting central bank
excellence
of the 1970s, had been prepared to tolerate inflation of 2 per cent or a little more, but would
always act to reduce inflation if it rose to 3 per cent or more. This seemed to be a fairly sensible
approach. If we could achieve something like that in the 1990s, it would be a major improvement on
inflation than the rich, whose affairs can be managed to protect them from, and in some cases to profit from, the effects of
inflation. Society can learn to live with inflation by indexation, and adjustment to behaviour, but real resources are used in
the process.
6
Incidentally, it was never true, contrary to popular belief, that the RBNZ Governor's salary was linked to inflation
performance. What was true was that he could be dismissed for failing to achieve the target.
7
From 1952-1970, the figures for two leading low inflation countries were as follows:
______________________________________
Average Minimum Maximum
______________________________________
Germany 2.0 -2.6 4.6
Switzerland 2.2 -1.4 5.4
______________________________________
our performance of the 1970s and 1980s. We could always argue later about whether the target might
be a little lower or more tightly defined.
The 'on average, over the cycle' part of the formulation came from the observation that inflation was
hard to control precisely, and that attempts to do so over short periods risked exacerbating the sort of
economic instability we were trying to lessen. Experience has in my view borne out this judgement,
even though the Australian approach was initially widely thought to be a bit too soft.
How has performance turned out?
So much for the history of how we came to inflation targeting. Now I want to address performance. I
offer several tests. First, have we achieved the target? Second, has the inflation psychology been
removed from the economy? Third, has this been associated with any cost to growth, or has it instead
been associated with good overall economic outcomes?
Inflation performance was shown in Graph 1 over a long period. The low average rate of inflation, and
its greater degree of stability, since mid 1993 is quite clear. Table 1 shows some relevant data.
Table 1: Inflation in Australia(a)
1970s 1980s 1990s 1993-2002
CPI 10.1 8.3 2.3 2.3
CPI ex interest 10.1 8.1 2.8 2.5
Treasury underlying(b) 10.1 8.1 2.5 n.a.
Weighted median(c) 7.9 2.5 2.2
Trimmed mean(c) 7.9 2.5 2.2
Market Sector ex volatile items 2.6 2.3
Target variable(d) 2.4
(a) Adjusted for RBA estimates of the effect of the new tax system
(b) Treasury underlying inflation series published from March 1972 to June 1999
Statement on Monetary Policy
(c) See Box D in May 2002 for details of the definition of underlying inflation
(d) Treasury underlying series from September 1993 to June 1998. CPI ex taxes and health policy changes
thereafter
In a paper given in 1995, my colleague, Guy Debelle, and I explained the target as follows:
'...if, some years hence, we can look back and observe that the average rate of inflation has a "2" in
front of the decimal place, that will be regarded as a success.'8
I can report that, after ten years, it is indeed the case that consumer price inflation, on any measure,
has a 2 before the decimal place. For the target variable (which was the Treasury underlying CPI
series until 1998 and the CPI thereafter9), and abstracting from the effect of the GST in 2000, the
average inflation rate over the 38 quarters up to December 2002 is 2.4 per cent.
There have been a few cyclical swings in inflation over the period. But these swings were pretty
moderate (which is, after all, the intention with inflation targeting). The targeted inflation measure
varied between a high of 3.3 per cent and a low of 1.4 per cent. Measured in underlying terms using
the median CPI, which is a measure often used by the Bank's professional staff, the lowest inflation
rate in the period was 1.3 per cent in March 1998, and the highest was 3.2 per cent reached briefly in
late 2001. Overall then, inflation has stayed within about 1 percentage point of 21⁄2 per cent. This is, in
my view, a most satisfactory performance.
Has the inflation psychology so prevalent in the 1970s and 1980s been removed from the economy?
The answer is yes, with relatively few exceptions. Measures of inflation expectations are scarce,
especially ones over a longer horizon. The Melbourne Institute's measure of expected inflation,
derived from a monthly household survey and funded by the RBA over many years, showed a sharp
break in 1990 when actual inflation came down. During the 1990s, it did not move much. It increased a
lot in 2000 just ahead of the introduction of the GST which pushed the level of the CPI permanently
higher and the rate of change of the CPI temporarily higher, and came down again shortly thereafter.
The median measure averaged about 41⁄2 per cent over the decade, which shows a persistent error in
this measure of expectations (of the kind which is not supposed to occur in economics!). One reason
for this is that there continues to be a significant proportion of households who anticipate inflation of
10 per cent or more even after a decade of inflation of 21⁄2 per cent. Presumably our message has yet
to filter through completely.
To the extent we can extract information from business surveys, they suggest that most businesses
expect a low single-digit inflation rate to prevail for the economy in general. Perhaps more importantly,
few businesses appear to believe they have 'pricing power', and individual price changes against a low
inflation backdrop are much more transparent than was the case under high inflation. Witness, for
example, the degree of scrutiny of price rises in the period after the introduction of the GST, or the
attention routinely given to changes in petrol prices. Much of this is due, of course, to the more
competitive nature of markets and the activities of the competition authorities, but the low inflation
environment is also an important factor.
Perhaps the group who devotes most effort to anticipating inflation trends is professional investors in
the bond market. Nominal bond rates are usually thought to embody an allowance for future inflation.
The difference between the indexed bond yield - a real yield - and the conventional bond yield is a
measure of the average rate of inflation anticipated over the life of the bond plus, probably, a premium
for the variability of inflation. Initially, markets were sceptical that we would keep inflation to the
targeted rate. But after monetary policy passed the first test in the inflation-targeting period -
tightening in 1994 ahead of a pick-up in inflation in 1995, which was successfully capped and reversed
- this measure of inflation expectations came down to levels which were consistent with the inflation
target. There have been ups and downs in this gauge of expectations, which broadly corresponded to
the cycle in actual inflation. But on the whole, from 1996 through to 2003, these expectations have
been fairly closely matched to the 2 to 3 per cent target.
In general, I think we can say that while high inflation expectations have not been eradicated from
every corner of the economy, generally speaking inflation expectations are low, consistent with the
inflation target, and quite stable. That is no small benefit because it allows policy more flexibility than
would otherwise be the case in assisting output in the face of shocks.
Has this performance on inflation been associated with any cost to growth? While we cannot know the
counterfactual, I think everyone now acknowledges that Australia's growth performance in the past
decade has been exceptionally good. Table 2 updates a table from an earlier evaluation of
performance made by staff at the International Monetary Fund (IMF) in 1998, which compared
Australia with other inflation-targeting countries and a group of non-inflation-targeting countries.10
There are now more inflation-targeting countries than when that study was conducted and, of course,
Appendix
there are more years of experience. The details the construction of the data. For my present
purposes, I will simply update the original table, but the Appendix also updates the sample of
inflation-targeting countries.
Table 2: Inflation and Growth
Per Cent
Annual inflation(a) Real GDP growth(b)
Mean Stadard Mean Standard
deviation(c) deviation(c)
Australia
1980-92 7.2 2.4 2.8 2.7
1993-present 2.3 0.6 3.9 1.1
Other OECD inflation-targeting countries
1980 to adoption of targets(d) 10.2 6.1 2.3 2.6
Adoption of targets to latest 2.7 1.3 3.0 1.6
OECD non-inflation-targeting countries(e)
1980-92 6.4 3.9 2.6 2.0
1993-latest 2.2 0.9 2.9 1.8
(a) Headline consumer price inflation for all countries except Australia (the Treasury underlying CPI up to June quarter 1998 and
the CPI since with an adjustment for the effects of tax and health policy changes), New Zealand (the CPI excluding credit
services after December quarter 1989) and the United Kingdom (the Retail Price Index, excluding mortgage interest
payments). Inflation rates are calculated as the year-ended change in the quarterly index
(b) GDP growth rates are calculated as the year-ended change in the quarterly GDP series. Where quarterly data are not
available, year-average growth calculated from IMF data are used
(c) Calculated as the average of standard deviations across countries
(d) Dates used for adoption of targets are: Canada, 1991; Finland, 1993; Greece, 1998; Iceland, 2001; New Zealand, 1990;
Norway, 2001; Spain, 1994; Sweden, 1993; the United Kingdom, 1992
(e) Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Japan, Luxembourg, Portugal and the United States. Finland and
Spain are considered to have become non-inflation-targeting countries upon joining the third stage of the EMU in 1999, and
Greece in 2001. The EMU is treated as a single entity after 1999
The table shows mean and standard deviations for inflation and real GDP growth for two periods: from
1980 to the adoption of inflation targeting, and since the adoption of inflation targeting. The data are
for Australia and two country groups: other inflation-targeting countries in the Organisation for
Economic Co-operation and Development (OECD), and other (non-inflation-targeting) countries in the
OECD.
The essential results are unchanged from those of a few years ago:
• all groups observed a decline in inflation, much reduced inflation volatility, a pick-up in
growth and reduced volatility of growth - it was a good period for most economies;
• compared with non-inflation-targeting countries, inflation-targeting countries saw a bigger
reduction in inflation (from a higher starting point), a proportionately larger reduction in
inflation variability, a larger pick-up in growth and a more marked reduction in volatility of
growth (again, from a higher starting point);
•
Australia enjoyed a smaller absolute variability in inflation, a bigger pick-up in growth, a
bigger reduction in volatility of growth and a smaller absolute volatility in growth than either of
the other two groups.
This is a particularly good story for Australia. It is apparent that inflation targeting has been associated
not with reduced growth, but faster growth on average and less variable growth, as well as less
variable prices. I will be the first to say that monetary policy cannot claim all the credit for this
performance. There were, of course, major pay-offs during this period from a wide range of policy
initiatives which aimed to liberalise markets, and make them more competitive. It is crucial that people
understand the importance of these outcomes and the reforms which drove them. Monetary policy, as
a demand instrument, cannot change the supply side of the economy, which is where the vast bulk of
the community's gains in income and wealth originate.
That said, monetary policy has to be made in a way which is cognisant of, and adapts to, the changes
taking place on the supply side. Without that adaptability, the gains from other reforms would not have
been as easily or as quickly realised. It also has an important role in responding to cyclical
demand-side shocks in a prompt, measured way. In general, I think the conduct of monetary policy
during the period of inflation targeting has exerted a stabilising influence on the economy over the
course of the business cycle, and has allowed the supply-side improvements to find expression in
higher levels of non-inflationary growth.
The Future
The record of inflation targeting in Australia is a good one. But it is not enough to look only backwards.
We need as well to be asking whether the system we have is capable of coping with circumstances
different to, and less advantageous than, the ones we have seen to date. I'd like to organise our
thoughts here around three issues.
First, deflation. An argument might be made that fighting inflation is fighting the last war. Maybe the
new enemy is deflation. Certainly, more countries have experienced deflation in the past year than for
many years, if not decades, and in a great many more countries inflation is very low and renewed
cyclical weakness could, if it occurred, push it down further, perhaps to or below zero in some cases.
There is no time today to go into detail about how we ought to think about deflation.11 The point for
today is that inflation targeting isn't just inflation fighting. It involves inflation fighting but it also involves
deflation fighting in equal measure. To my knowledge, all the countries practicing inflation targeting
view their targets as symmetric: undershoots are no better than overshoots. All targets are centred on
a number above zero, partly to guard against unexpected lapses into deflation. Further, credible
inflation targeting that helps anchor expectations of inflation above zero helps to avoid the worst kind
of deflation, which is not a temporary decline in prices but a persistent and widespread expectation of
falling prices.
The second potential challenge is dealing with adverse supply-side shocks. Monetary policy works on
the demand side of the economy. When the prevailing disturbances come from that side too - as they
have in the conventional business cycles which we have experienced in the past - monetary policy
can dampen fluctuations in demand and by doing so it will be stabilising price fluctuations. When the
shocks emanate from the supply side of the economy, on the other hand, things can be more difficult.
Adverse supply shocks push activity down and prices up. Should this persist for any length of time,
monetary policy is faced with more awkward choices, though there is no uncertainty about what its
longer-term objective ought to be: to control inflation.
For most of its history, inflation targeting has coincided with, if anything, favourable supply shocks. We
have had positive surprises on productivity, and in the supply-enhancing effects of internationalisation
of production. These surprises tended to push output up and prices down. This has been, we have to
admit, a very benign environment in which to operate monetary policy. It may not always be this way in
future.
Inflation-targeting central banks will certainly find challenges if adverse supply disturbances occur, but
this is also true of any other monetary policy model we could think of. I imagine that inflation targeters,
if faced with a rise in inflation above target due to supply shocks, will focus on gradually bringing
inflation down again. If inflation expectations are well anchored near the target rate, as they appear to
be in most countries, there is no reason to believe this will be unduly difficult, and in fact there would in
such circumstances be flexibility to take some time to achieve convergence back to the target, which
could help adjustment on the real side of the economy significantly.
The third issue for the future is how, if at all, to respond to major movements in asset prices. This is
the most difficult problem to tackle, both conceptually and in practice. Most people agree that asset
per se
price inflation should not be an objective of monetary policy. Most people also agree that, to the
extent that asset price movements have implications for the course of the economy over the standard
forecasting horizon of a couple of years - through wealth effects, for example - those effects should
be allowed for in the setting of monetary policy. This is really just saying that in searching for the
optimal policy setting to achieve the inflation target over a two-year horizon, all the relevant information
should be taken into account. We can all sign up to that.
But there is a lot more to asset price dynamics than that. These events typically have a lower
frequency than the business cycle frequency to which our normal policy practices are attuned. They
build up over a number of years. Furthermore, asset price movements and their effects are often
asymmetric. When asset prices are rising, they can easily co-exist with low CPI inflation. But because
this is often associated with a build up in debt, the ensuing correction in asset prices can cause acute
distress to borrowers. This means both that spending behaviour is affected and that there can be a
risk of systemic financial instability because distressed borrowers often mean a deterioration in the
asset quality of the lenders. This, if it occurs, weakens the economy significantly and can push inflation
down sharply.
In that final phase of this asset price cycle, monetary policy will need to be easy. The question,
however, is whether during the earlier phase it should be tighter than normal, in order to try to lessen
the probability of a bust, at the expense of having somewhat lesser short-term growth and inflation
lower than the announced target. Put another way, should policy accept a mild short-term undershoot
of the inflation target in order to lessen the likelihood of a much bigger undershoot in three or four
years' time?
Here there is less agreement. Some people argue that there is a strong case for this additional
response, particularly on the grounds that if the costs of the bust are large it is worth paying some cost
to avoid it if at all possible. Others argue that a modest response of policy to the asset price problem
would be ineffective in dampening the asset price dynamics, and that an aggressive response would
bring on the problems that policymakers are setting out to avoid. In this view, policy should stick to its
usual macroeconomic concerns, responding to any after-effects of the asset price cycle when they
emerge.
Does inflation targeting allow scope for responding to asset price concerns, if that is thought to be
sensible? I think it does, provided we are prepared to adopt a sufficiently long time horizon. Inflation
targeting is often presented, for expositional purposes, as a commitment to vary the instrument so as
to keep the forecast inflation rate at the target at some particular horizon - two years, for example.12
But surely policymakers care, in principle at least, not just about the inflation rate two years from now,
but the whole path of future prices. We care not only about where inflation will be two years from now,
but where it might be heading at that time and how quickly.
Consider two hypothetical outlooks. In one, a given set of policy interest rates assumed for the
forecast is associated with inflation in two years' time at the target, but also with an asset price boom
and increasing leverage, which means that there is an uncomfortably high probability that, beyond the
two-year horizon, perhaps in year 4, there will be a crash which could impair the financial system, take
the economy into recession and reduce inflation well below the target. In the alternative outlook, a
higher assumed set of policy interest rates is associated with lower growth and lower than target
inflation over the standard two-year horizon, but also with reduced risk of the really big fall in inflation
and activity in year 4.
Graph 4
Would we automatically select the first of these two possibilities purely on the basis that inflation is at
target in two years' time? There would be a fair proportion of people who might select the second
alternative, given the choice.
Of course, life is not quite as simple as the hypothetical choice I have concocted here. We don't know
enough about the behaviour of asset prices, much less their linkages to the economy through the
financial sector, to make such forecasts with any confidence. Nor do we know much about how the
dynamics might respond to monetary policy. So we cannot easily identify the optimal response to the
situation. There would, as well, be significant communication issues associated with a policy which
sought to reduce the risks associated with asset price developments, but which carried the side effect
of slowing the economy.
But despite the difficulties, it seems to me that thinking through the nature of risks posed by these
asset price swings is helpful. Policy should not rush to respond to every asset price movement that
might
comes along. But a case be made, on rare occasions, to adopt a policy of 'least regret' so far as
asset prices are concerned, if financial and macroeconomic stability were thought to be at risk. To do
so would probably require an acceptance of a longer time horizon for inflation targets, and an
acceptance of a bit more short-term deviation from the central point of the target. These issues remain
unresolved among theorists and practitioners of monetary policy. There will be a good deal of further
discussion about them in the period ahead.13
Conclusion
Inflation targeting has been a successful model for monetary policy in Australia. It has been associated
with lower, less variable inflation, and better and less variable economic growth. While I would not
claim that improved overall economic performance has been entirely due to the adoption of inflation
targeting, I do claim that this approach to policy has made a significant contribution.
Inflation targeting allows a considerable degree of short-term flexibility for monetary policy decisions,
but also imposes the appropriate medium-term constraints. That's a very good combination. There are
no alternative models at the moment for Australia's monetary policy which offer a better mix.
We must still be on the look-out for challenges. Coping with cyclical fluctuations in the economy and
shocks of various types will remain constant tasks. But I think that the most difficult issues likely to
confront monetary policymakers in most advanced countries remain those associated with asset price
swings. Opinion remains divided as to how to cope with them. But in the event that opinion coalesced
in favour of some more active response to asset prices in the interests of longer-run financial and
economic stability, I think inflation targeting as a system is sufficiently adaptable to encompass that.
Will we return here in another decade to celebrate twenty years of inflation targeting? Actually, I hope
not. My hope would be that a system for running policy which has worked well will continue to do so,
adapting as needed to changing conditions, to the point that a sound monetary system is just part of
the economic furniture and we spend our time debating other issues. I think we are well on the way to
that situation, and our part in the RBA is to keep us on that track.
APPENDIX (for Table 2)
Table 2 is an updated version of a table prepared originally in Brooks (1998). The inflation rates are
calculated as the year-ended change in the quarterly index. The GDP growth rates are calculated as
the year-ended change in the quarterly GDP series. Where quarterly data are not available,
year-average growth calculated from IMF data are used. Other overseas data are sourced from
national statistical authorities and the OECD, while Australian data are sourced from the Australian
Bureau of Statistics (ABS).
Mean inflation and growth rates for the country groupings are calculated as