speech the year ahead philip lowe [ * ] governor address to national press club of australia sydney – 2 february 2022 this is the fourth time that i have addressed the national press club. thank you for having me back. as i've done on each of the three previous occasions, i have titled my remarks ‘ the year ahead ’. i will talk about our latest forecasts, the outlook for monetary policy and yesterday's decision by the reserve bank board to end the bond purchase program. in summary, i remain optimistic about australia's prospects. our economy has weathered the pandemic much better than was expected, jobs growth is strong and unemployment is low, household and business balance sheets are generally in good shape and wages growth is picking up. these are all welcome developments. at the same time, though, the country faces challenges. the pandemic is not yet behind us and the sharp pick - up in inflation in some parts of the world, particularly in the united states, has added a new element of uncertainty to the outlook. we also face the challenge of lifting productivity growth, including through investing in the workforce skills and technologies that are needed to generate sustained increases in real wages. and over time and as conditions allow, we will need to navigate a return to more normal settings of monetary policy. a useful place to start is to look to the year just past for lessons. to do this, the table below shows the outcomes for the key economic variables in 2021 as well as the rba's central forecasts at the start of last year. table 1 : key economic variables – 2021 per cent outcome forecast difference ( percentage points ) gdp growth 5 * 3½ 1½ unemployment rate 4. 2 −1¾ cpi inflation 3. 5 1½ + 2 underlying inflation 2. 6 1¼ + 1¼ wage price index 2¼ * 1½ + ¾ ( a ) * estimate based on available data. sources : abs ; rba the picture is pretty clear. the economy performed significantly better last year than we had expected – gdp growth is likely to have been around 5 per cent, compared with our forecast of 3½ per cent. this is despite the setback caused by the delta outbreak. the unemployment rate also declined by more than we had expected and now stands at 4. 2 per cent, the lowest rate since the peak of the resources boom. these stronger gdp and labour market outcomes have translated into higher inflation than we were expecting. we had expected underlying inflation to be

particularly resources ) and services. a depreciation of the australian dollar in response to negative developments in external conditions could be expected to act as a buffer in the way that it has in the past. while i have focused today on a number of the downside risks, we should not lose sight of the fact that the central scenario over the next few years is for a gradual moderation of growth in china. and over the longer term, there is a lot of room for further development of the chinese economy, which will provide australia with many economic opportunities. while the value of non - rural exports to china have declined with the fall in commodity prices, the value of other exports to china have been rising strongly of late ( graph 11 ). we are likely to continue to benefit from rising incomes and the associated demand for high - quality food, goods and a wide array of household and business services from china and the region more broadly. graph 11 bis central bankers ’ speeches