Inflation analysis: Australia. Notes: analysis of headline inflation dynamics based on our benchmark model specification (UCSV-SUR, see Section 4 for model details). Panel A reports the decomposition of inflation into a trend (or persistent) component and the transitory (or inflation gap) component. Panel B also includes two trend inflation estimates based on the benchmark model specification, the smoothed estimates (solid black line, with shadowed area reflecting 16th and 84th quantiles), and the real-time estimates (from 2004, black discontinued line), trend inflation estimates using an alternative model (UCSV-BL, orange line) using only backward-looking information (historical inflation realizations), the level of the inflation target (or central value of the target range, red dashed line) announced by the central bank, and survey (long-term) inflation expectations from Consensus Forecasts (blue dots). Panels C and D show the estimated standard deviation of the volatility of inflation gap and trend inflation respectively, with solid black lines show posterior mean estimates, and the thinner lines and shadowed area show the 66% confidence sets from the modeĺs posterior distribution. Source: Haver analytics and authors’ calculations.