There’s always debate over speed limits in Australia. Some say speed kills. Others say that leaps in car safety over the decades mean our speed limits could – and should – be lifted (the last time they were tweaked was half a century ago when the country moved from using “miles” to “kilometres”).

But it’s not just our roads that have speed limits. Following the release of the latest “national accounts” data – a breakdown of how the economy is going by the Australian Bureau of Statistics – several economists and commentators have said the economy might be nearing its speed limit.

What exactly the country’s speed limit may be is up for debate.Credit: Matt Davidson

Real gross domestic product climbed 0.4 per cent in the three months to September: a fairly unremarkable result that was lower than most economists were expecting. But along with growth from the previous nine months, which the bureau revised up a little, the economy ended up 2.1 per cent bigger in the year to September.

That’s broadly in line with forecasts made by the Reserve Bank in November when it said growth would probably pick up a bit to its “potential growth rate” (around 2 per cent) and hover there over the next two years.

That potential growth rate is effectively the economy’s speed limit: how fast it can grow without excessively revving up inflation. Of course, when supply and demand both grow in line with each other, it doesn’t tend to lead to price pressure because we don’t end up with big shortages.

But because resources such as workers, materials and machines are limited – and can’t generally be increased very quickly – when demand (spending by households, businesses and governments) ramps up too quickly, we tend to see prices balloon.

So how is our speed limit determined?

It’s not actually a hard and fast number, although the Reserve Bank reckons........

© The Sydney Morning Herald