Is there an unobserved components common cycle for Australasia? Implications for a common currency

We use unobserved components methodology to establish an Australasian common cycle, and assess the extent to which region-specific cycles of Australian states and New Zealand are additionally important. West Australian and New Zealand region-specific growth cycles have exhibited distinctively different features, relative to the common cycle. For every Australasian region, the region-specific cycle variance dominates that of the common cycle, in contrast to findings for US BEA regions and prior work for Australian states. The distinctiveness of New Zealand's output and employment cycles is consistent with New Zealand retaining the flexibility of a separate currency and monetary policy, for periods when significant region-specific shocks occur.