my main topic today which is the institute ’ s contribution to macroeconomics. i will focus on three main areas of contribution by the institute to the greater good of australian macroeconomics. the first is indeed leading indicators and business cycle analysis. the second is modelling and forecasting. the third is surveys. leading indicators and business cycle analysis for many years, the institute has been associated with its series on leading indicators, a summary statistic that aims to predict economic activity. i am not a particularly big fan of leading indicators as a general rule. personally, i prefer to look at and think about all the components of a leading indicator individually, rather than attempt to summarise the information in one index, particularly given that what matters most at different points in the economic cycle varies through time. ( the nils leading indicator of employment at the melbourne institute that i was just talking about probably does a better job of forecasting than the gdp leading indicator. ) that said, if one were going to use one leading indicator series in australia, then it would be the melbourne institute ’ s. as an aside, i was intrigued to learn from reading ross williams ’ book that the institute was the first body in australia to publish seasonally adjusted and trend data, some time before the abs began to do so. bis central bankers ’ speeches through the work of ern boehm, don harding and adrian pagan, the institute has also made a significant contribution to business cycle analysis. those three gentlemen have generated a number of great papers on the topic of measuring and dating business cycles. they have produced the definitive body of work for the australian economy. out of that research has come the most cited dating of australian business cycles. modelling and forecasting the melbourne institute has been synonymous with modelling, particularly during the reign of peter dixon. the modelling by peter dixon, as well as that done by peter brain was, of course, more of the cge world than the macroeconomic world. now a critical question is whether those two worlds overlap. i am told by those who can still remember, that a fair bit of time was spent trying to marry the short - term macro forecasting models at the treasury and the rba with the cge model of the institute. many conferences were held on the issue. i am not sure the question was ever really answered. but besides the modelling side of things, the institute regularly publish an assessment of the australian economy in the australian economic review, as well as discuss the outlook for

, and the downward phase without a slump, that would be a major achievement. we have, by and large, managed the first part and there are some promising early signs that things may turn out not too badly in the second. but early signs are just that : early. it is far too soon to think about counting any chickens yet. let ’ s also be clear that the capacity to fine - tune these outcomes is very limited. most importantly, for today ’ s discussion, even if we do manage this episode as successfully as we might dare hope, major long - run challenges will remain. these are the things i want to highlight today, two of them in particular. first, fiscal sustainability. the debate here has, i would have to say, been overly - focused on budget outcomes in particular years. the real issues are medium - term ones. put simply, there are things we want to do as a society, and have voted for, that are not fully funded by taxes over the medium term, as is starting to become clear in the lead up to the may budget. here i refer to the very important speech given last evening by my colleague, treasury secretary, martin parkinson. 1 our situation is not dire by the standards of other countries but neither are the issues trivial. a conversation needs to be had about this. second, demographics. more people will be moving into retirement, and fewer people entering the workforce, over the years ahead. our regular discussion doesn ’ t pay much attention to this. it ’ s understandable that with very public announcements of job losses – albeit many of them several years into the future – people become worried about jobs. they ask : where will future jobs come from? there are two things to say. one is they will come from areas we don ’ t see yet. in the middle of 1991, at the low point of the last serious recession, people were very pessimistic about future employment prospects. the rate of unemployment was in double digits. parkinson m ( 2014 ), “ fiscal sustainability & living standards – the decade ahead ”, speech at the sydney institute, sydney, 2 april http : / / www. treasury. gov. au / publicationsandmedia / speeches / 2014 / fiscal _ sustainability. bis central bankers ’ speeches but today, over 20 years later, there are nearly 4 million more jobs in the economy than there were then. the rate of unemployment, even though it has gone up recently, is just slightly more than half what