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Australian Wage and Price Inflation: 1971-1994


  • Lynne Cockerell

    (Reserve Bank of Australia)

  • Bill Russell

    (Reserve Bank of Australia)


This paper estimates an imperfect competition model of price and wage adjustment for Australia. The results suggest the Australian economy can be characterised as one where firms are trying to achieve their desired long-run income share while workers are primarily concerned with maintaining their real wage. The estimation of the price-wage model is complicated by two problems; namely the substantial and persistent changes in income shares and the changing means in the inflation series over the sample. The first problem was overcome by extending the estimation period to include the wage shocks in the early 1970s which allows the income shares to be characterised as stationary. The second problem was addressed by imposing a restriction to the wage equation. This allowed a range of possible steady state inflation rates in the model over the estimated sample.

Suggested Citation

  • Lynne Cockerell & Bill Russell, 1995. "Australian Wage and Price Inflation: 1971-1994," RBA Research Discussion Papers rdp9509, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp9509

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    References listed on IDEAS

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    11. Yash P. Mehra, 1993. "Unit labor costs and the price level," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 35-52.
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    14. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, January.
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    Cited by:

    1. Nicolas Canry & Julien Fouquau & Sébastien Lechevalier, 2010. "Price Dynamics In Japan (1981-2001): A Structural Analysis Of Mechanisms In The Goods And Labor Markets," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(3/4), pages 357-374.
    2. Gordon de Brouwer & James O'Regan, 1997. "Evaluating Simple Monetary-policy Rules for Australia," RBA Annual Conference Volume,in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
    3. Nicolas Canry & Julien Fouquau & Sébastien Lechevalier, 2010. "Price Dynamics In Japan (1981-2001): A Structural Analysis Of Mechanisms In The Goods And Labor Markets," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 53(3/4), pages 357-374.
    4. Mallick, Debdulal, 2016. "Policy Regimes and the Shape of the Phillips Curve in Australia," MPRA Paper 71082, University Library of Munich, Germany, revised 2016.
    5. Gordon de Brouwer, 1998. "Estimating Output Gaps," RBA Research Discussion Papers rdp9809, Reserve Bank of Australia.

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