Are bond yields presaging a low-growth Australia?

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Cross-posted from Mark the Graph:

Over the long-run, inflation-indexed bond yields appear loosely correlated with trend real GDP growth.

With bond yields as low as they are, the question has to be asked: Is Australia heading for a low-growth future? Are we heading to a future where GDP trend growth is (perhaps) well below 2 per cent per year? This would be down from the long-term trend of 3.7 per cent prior to the global financial crisis (or Great Recession as it is known elsewhere).

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In today’s chart I have plotted the inflation-indexed bond yields (from the RBA’s table f02), and through the year real GDP growth (with a 41-term Henderson Moving Average). The TTY GDP growth rates and the moving average are calculated from ABS National Accounts data.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.