The pace an economy can grow at over the long run without overheating, set by growth in the workforce and productivity. About 2.5% a year for Australia and 2% for the US.
Trend or potential growth is the economy's sustainable speed limit. It equals the growth in hours worked plus the growth in output per hour.
Growth above trend uses up spare capacity, eventually pushing up wages and prices. Growth below trend opens up spare capacity and lifts unemployment.
Why it matters
Central banks compare actual growth with trend when judging whether the economy needs restraining or support. The estimates are uncertain and change with population and productivity.
