RDP 2014-12: A State-space Approach to Australian GDP Measurement 6. Conclusion

In this paper we have constructed several new measures of Australian GDP growth that use state-space methods to extract a measure of underlying economic activity from the noisy published measures of expenditure, income and production. Although our measures are highly correlated with published GDP growth, they are noticeably less volatile and easier to forecast. Moreover, they explain variations in inflation and unemployment as well as or slightly better than the published GDP growth measures. Our measures also perform well in real-time.