Boosting long-term economic growth is key

For those who study economics, at any level, one of the first things you learn about are the four factors of production: Land, labour, capital, and enterprise, writes Jim Power.

In the real world, these factors of production are utilised and combined to generate economic activity, and then policymakers decide how the fruits of economic growth are utilised and divided up among members of society.

An economy is said to be operating at its maximum potential, or achieving ‘potential output’, when all of the factors are fully utilised. When an economy is said to be operating above potential — when the factors of production are being stretched beyond their capability — an economy tends to generate intense inflationary pressures and overheat.