This paper sets out the Treasury’s view on the rate of trend growth over the recent past and presents the latest assessment of the neutral rate to be used for economic forecasts for the Budget 2002 projection period. This view is based upon a rigorous and detailed analysis which incorporates recently updated demographic projections, and for the first time, uses labour-force data from a single source – the Labour Force Survey (LFS). This allows an important improvement to the analysis by distinguishing the contribution to trend growth from average hours worked per person. It updates and extends the analysis set out in previous papers.
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