are reasonable prospects that these favourable aggregate outcomes can continue for a while yet. the rba ’ s central forecasts, which were released last week, are for around trend growth in the economy over the next couple of years, and for underlying inflation to remain in the 2 – 3 per cent range. the unemployment rate is also expected to remain low, although some increase is possible over coming months. at the industry level, the picture is a lot more complicated. the economy is clearly going through a period of heightened structural change, and this is set to continue. some industries are expanding in relative importance, while others are contracting. given this, it is difficult to be sure how the countervailing expansionary and contractionary forces will balance out. so at the rba we are carefully examining every piece of data that comes in for insight into the net effect of these forces. we are also frequently talking to businesses and industry groups to better understand what is happening in firms at the forefront of structural change. it is the balance between these various forces that is likely to be a major influence on how the australian economy evolves over 2012 and beyond. before i conclude, i would like to say just a few additional words about the outlook for inflation. over recent quarters, headline inflation has come down as expected due to the unwinding of the large rise in fruit and vegetable prices that occurred in early 2011 ( graph 7 ). over the next few quarters further declines in the year - ended headline inflation rate are expected as the earlier increases in food prices fall out of the figures. indeed, it is likely that the headline rate will fall below 2 per cent in the middle of 2012, before increasing again to above 3 per cent. this increase is partly due to the introduction of a price on carbon, which is estimated to add 0. 7 percentage points to headline inflation in the 2013 financial year. as was the case with the introduction of the gst more than a decade ago, the bank will look through this direct effect when setting monetary policy. in underlying terms, inflation is expected to remain within the 2 – 3 per cent range over the next couple of years, with the carbon price adding around ¼ percentage point to underlying inflation in the 2013 financial year. one interesting aspect of the recent inflation data is the divergent trends in the prices of internationally traded items and the prices of goods and services that are not internationally traded ( graph 8 ). over recent times, the prices of non - traded goods and services have

: / / www. rba. gov. au / speeches / 2008 / sp _ gov _ 190108. html ). view ’, january ( available at recent developments do not suggest that those risks are any more likely to be realised than was the case a couple of months ago. to date, in fact, the financial developments that have so occupied the minds of developed world policy - makers have not been as big an issue for many countries in the emerging world, at least not those most important to australia. banks in those cases have not had serious funding problems, perhaps in part because their own exposures to the bad assets were minimal. capital markets, which are less important as avenues of funding than in many developed economies, have not been a source of significant disruption. admittedly, share markets in the emerging economies have declined noticeably, but credit expansion has continued unimpeded and, as i indicated a moment ago, economic growth appears to have remained pretty solid. in fact, around much of the emerging world at the moment, the bigger problem seems to be neither the near or actual recession of the united states, nor the credit crunch about which we hear so much in the discussion of the major countries, but inflation. from asia to latin america to africa, as well as in many of the industrial countries, we are hearing a lot more about inflation now. food price rises loom large in developing countries ’ consumer basket, so the big rises in grain prices over the past year have been very prominent. several potential drivers of these increases have been nominated. one is the change towards a more protein - intensive diet as developing countries ’ incomes rise, which increases demand for grain to feed animals kept for meat. this is no doubt a factor, but it is a long run trend and there is no evidence that meat consumption has exploded just in the past year. 2 another is the diversion of some grains towards production of bio fuels, with up to half the increase in the consumption of some crops in 2006 - 2007 going to this source, thus constraining supply available for additional food production. 3 but while this has played a role at the margins, supply disruptions have arguably been the most important cause of big price rises in the past year. in particular, supply has been disrupted by adverse weather conditions in key production areas, for example, the drought in australia. to the extent that those effects are temporary, it could be expected that food prices will not continue to rise at the same pace