philip lowe : today ’ s monetary policy decision speech by mr philip lowe, governor of the reserve bank of australia, sydney, 3 may 2022. * * * thank you for joining us this afternoon. i would like to use this opportunity to explain the reserve bank board ’ s decision today and to answer your questions. today, the board decided to increase the cash rate target by 25 basis points to 35 basis points and to increase the rate paid on exchange settlement balances from 0 per cent to 25 basis points. it also decided to not reinvest the proceeds of the bank ’ s government bond holdings as they mature. these decisions reflect a judgement by the board that it is now time to begin withdrawing some of the extraordinary monetary support that was put in place to help the australian economy during the pandemic. two considerations are particularly relevant here. the first is that the economy has been very resilient, unemployment is low and economic growth is expected to be strong this year. the second is that inflation has picked up more quickly, and to a higher level, than was expected and there is evidence that labour costs are increasing more quickly. in these circumstances, the board judged that it was appropriate to start the process of normalising monetary conditions. i acknowledge that this increase in interest rates comes earlier than the guidance the bank was providing during the dark days of the pandemic. during that period, especially in 2020, the national health situation was precarious and the economic outlook was dire and clouded by great uncertainty. the board wanted to do everything it could to help the country get through that difficult period. in those unprecedented times, we judged that the economic damage from the pandemic was likely to require that interest rates remain at very low levels for years. as things have turned out, the economy has been much more resilient than was expected, which is clearly a welcome development. the combination of fiscal and monetary support has worked and the development of vaccines in record time has allowed our society to return to more normal functioning earlier than was thought possible. australians have also proven to be resilient and have adapted to the changed circumstances. as a result of these developments, unemployment has come down quickly. the unemployment rate now stands at 4 per cent. it is expected to decline further to around 3½ per cent over the course of this year, which would be the lowest level in nearly 50 years. labour force participation has also risen to a record level and a higher share of working -

putting in place avenues for redress. recent initiatives include evolving a more effective financial mediation bureau ( fmb ) to ensure that consumers of all financial service providers under the purview of the central bank have recourse to an independent, fair and impartial dispute resolution mechanism. earlier this year a deposit insurance scheme was introduced to further strengthen incentives for financial institutions to adopt sound financial and business practices and enhance public confidence in the financial system by providing explicit protection on deposits. bank negara malaysia is also currently finalising the details for the establishment of a credit counselling and debt management agency to be introduced early next year, with the aim of providing individuals with credit counselling and assistance in restructuring of their debts. to promote financial education at an early age, bank negara malaysia embarked on an education programme in schools on basic financial knowledge in partnership with the education ministry since 1997. further, in collaboration with the financial industry's associations, bank negara malaysia launched a ten year consumer education programme ( cep ) for the banking and insurance sectors. we are now in the fifth year of this programme. extensive information is being disseminated via the spectrum of distribution channels including newspapers, radio, websites, branches of financial institutions and outreach programmes. the consumer education efforts are also complemented by initiatives to promote a higher level of disclosure and transparency so as to ensure that consumers have access to relevant, comparable and timely information on products and services. a significant focus has been on the insurance sector, given that a significant segment of the malaysian consumers do not have good understanding of insurance products. in particular, guidelines on medical and health insurance and the requirements for marketing of life insurance policies, have been strengthened while rules for independent financial advisers have been introduced. in meeting socio - economic objectives, there is also a need to ensure that the welfare and interests of all segments of society are protected and that no target group is excluded or marginalised. indeed, an important component of our consumer protection framework is to ensure that all consumers continue to have access to basic banking services at reasonable costs. in this connection, a more interventionist approach has been pursued to require banking institutions to offer a list of basic banking services to all malaysians and to set guiding principles for the imposition of fees and charges for these retail products and services for individuals and small and medium sized enterprises. efforts have also been taken by the central bank in collaboration with the financial services industry to enhance the integrity of the payments systems and instruments, aimed at promoting confidence