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Estimating the NAIRU and the Unemployment Gap

Author

Listed:
  • Tom Cusbert

    (Reserve Bank of Australia)

Abstract

Spare capacity in the labour market is an important input into forecasts of inflation and wage growth. This article describes how the Bank estimates one measure of spare capacity in the labour market – the gap between the unemployment rate and the non-accelerating inflation rate of unemployment (NAIRU). Model estimates of the NAIRU are highly uncertain and can change quite a bit as new data become available. The estimates suggest that the NAIRU has declined since the mid 1990s and is currently around 5 per cent.

Suggested Citation

  • Tom Cusbert, 2017. "Estimating the NAIRU and the Unemployment Gap," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 13-22, June.
    • Handle: RePEc:rba:rbabul:jun2017-02
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2017/publications/bulletin/2017/jun/pdf/bu-0617-2-estimating-the-nairu-and-the-unemployment-gap.pdf
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    Citations

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    Cited by:

    1. Augustus J. Panton, 2020. "Climate hysteresis and monetary policy," CAMA Working Papers 2020-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Timothy Anderson & John Hawkins, 2021. "Modelling the Reserve Bank of Australia's Policy Decisions and the Case for a Negative Cash Rate," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(2), pages 179-189, June.
    3. Alexander Ballantyne & Tom Cusbert & Richard Evans & Rochelle Guttmann & Jonathan Hambur & Adam Hamilton & Elizabeth Kendall & Rachael McCririck & Gabriela Nodari & Daniel M. Rees, 2020. "MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 96(314), pages 225-251, September.
    4. Rachael McCririck & Daniel Rees, 2017. "The Neutral Interest Rate," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 09-18, September.
    5. Richard Evans & Angus Moore & Daniel M Rees, 2019. "The Cyclical Behaviour of the Labour Force Participation Rate in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 52(1), pages 94-106, March.
    6. Tim Robinson & Jiao Wang, 2018. "The Australian Economy in 2017–2018: The Importance of Stronger Non†Mining Business Investment Growth," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 51(1), pages 5-20, March.
    7. Chew Lian Chua & Tim Robinson, 2018. "Why Has Australian Wages Growth Been So Low? A Phillips Curve Perspective," The Economic Record, The Economic Society of Australia, vol. 94(S1), pages 11-32, June.
    8. Punnoose Jacob & Martin Wong, 2018. "Estimating the NAIRU and the Natural Rate of Unemployment for New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2018/04, Reserve Bank of New Zealand.
    9. James Bishop & Emma Greenland, 2021. "Is the Phillips Curve Still a Curve? Evidence from the Regions," RBA Research Discussion Papers rdp2021-09, Reserve Bank of Australia.

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