job as always keeping inflation tightly in a narrow range. we have not been what some have called ‘ inflation nutters ’. we have had a more balanced perspective, recognising that some degree of variability in inflation from year to year is both inevitable and appropriate. in particular, a flexible medium - term target is the best way for us to deliver low and stable inflation in a way that contributes to our other broad responsibilities, including employment and preserving financial stability. we want to ensure that we deliver an average rate of inflation in australia of between 2 and 3 per cent over time. it is in the public interest that we do this. it is also in the public interest that we pursue this objective in a way that promotes good employment outcomes for the country and preserves financial stability. in this way, we can best contribute to the 1 / 5 bis central banker's speeches economic prosperity and welfare of the australian people as required by the reserve bank act. our judgement, then, is that a flexible medium - term inflation target remains the right monetary policy framework for australia. while there are arguments for other types of arrangements, none of them is sufficiently strong to move away from the current framework, which has helped promote stability and confidence in the australian economy. so the new statement on the conduct of monetary policy represents continuity with the previousstatement. the main drafting change is to make the link between monetary policy and financial stability a little more direct. in the previous statement, monetary policy and financial stability were dealt with in separate parts of the document. yet, over the years, financial stability considerations have been a factor in our monetary policy deliberations. recently, for example, we have considered that a very quick return of inflation to the 2 to 3 per cent range at the cost of a material deterioration in the health of private sector balance sheets was unlikely to be in the public interest. the revised drafting recognises that our inflation target is pursued in the context of the bank ’ s broader objectives, including financial stability. recent economic developments i would now like to turn to the recent economic data. our economy continues its transition following the boom in commodity prices and mining investment. according to the latest national account, gdp increased by 3. 3 per cent over the year to june. this was a better outcome than was widely expected a year ago. it is also a little above most estimates of trend growth in our economy. partly reflecting this above - trend growth, the unemployment rate has declined by around ½ percentage point

philip lowe : monetary policy framework, recent economic developments and reserve bank of australia ’ s major projects opening statement by mr philip lowe, deputy governor of the reserve bank of australia, to the house of representatives standing committee on economics, sydney, 22 september 2016. * * * chair and members of the committee these hearings have become a significant part of our calendar. they are an important way through which the reserve bank is accountable to the public. i, myself, have been attending these hearings for more than a decade in various roles. i look forward now, in my new capacity as governor, to continuing the tradition of productive engagement between the committee and the reserve bank. you can be assured that i will do my best to answer your questions constructively and i look forward to regular hearings over coming years. in my opening remarks, i would like to cover three sets of issues. the first is the monetary policy framework. the second is recent economic developments in australia and elsewhere. and the third is the major projects that the reserve bank is currently undertaking. the monetary policy framework earlier this week, the treasurer and i released an updated statement on the conduct of monetary policy. these statements – the first of which was released in 1996 – record the common understanding between the reserve bank and the government on key aspects of australia ’ s monetary and central banking policy framework. they also set out agreed arrangements that promote the transparency and accountability of the bank. over recent times, there has been quite a lot of public commentary in australia and elsewhere about monetary policy frameworks. as you would expect, we are always studying the various arguments and have followed the recent debate carefully. our view is that a flexible medium - term inflation target remains the right monetary policy framework for australia. this was reaffirmed in the new statement on the conduct of monetary policy, which has also been endorsed by the reserve bank board. the goal remains for cpi inflation to average between 2 and 3 per cent over time. the current framework was introduced in the early 1990s and has served australia well. it provides the community with a reasonable degree of certainty about how the average level of prices is likely to change over the medium term. this helps people when making decisions about their savings and investments. low and stable inflation remains an important precondition for strong and sustainable growth in employment and incomes. it is worth emphasising that ever since the adoption of the current framework, the reserve bank has been a proponent of what is known as flexible inflation targeting. we have not seen our