Are bond yields presaging a low-growth Australia

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).

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.