Observations on the Australian business cycle

Abstract

What accounts for the Australian business cycle, what caused the economic slumps and what factors contributed to the decades’ buoyancy? To understand these questions, the current paper decomposes the Australian business cycle into its sources for the period 1980–2014. Our main finding is that the efficiency wedge and the investment wedge are the major forces behind Australian output variations. The efficiency wedge is behind the growth slowdown that emerged in the mid 2000s.