philip lowe : inflation – the recent past and the future keynote address by mr philip lowe, assistant governor ( economic ) of the reserve bank of australia, to banksa “ trends ” business luncheon, adelaide, 24 june 2011. * * * i would like to thank patrick d ’ arcy, hugo gerard, christie lewis and shalini shan for assistance in preparing this talk. good afternoon. i would like to thank banksa for the invitation to speak in adelaide today. it is a pleasure to be here. the topic that i would like to talk about this afternoon is inflation, which ties in very nicely with the main theme of banksa ’ s quarterly bulletin which is being released today. first, i will talk in some detail about the distinct cycle in underlying inflation that we have seen in australia over the past six years or so. after that, i will discuss the lessons that we might take from this cycle, as well as the broader lessons we have learnt from the past two decades of inflation targeting in australia. the recent cycle in inflation i would like to start with the cycle in underlying inflation that began in the mid 2000s ( graph 1 ). graph 1 across a range of measures, this cycle has been the most pronounced since the introduction of inflation targeting in the early 1990s. between 2005 and september 2008, underlying inflation rose by more than 2 percentage points from around 2½ per cent to just above 4½ per cent. then, since late 2008, underlying inflation has steadily declined to be around 2¼ per cent over the year to march 2011. as the rba discussed in the latest statement on monetary policy, this decline in underlying inflation looks to have now run its course and a gradual rise is expected over the next couple bis central bankers ’ speeches of years. given this, it is timely to look back and to review what caused the recent cycle and what lessons it holds for our understanding of the inflation process. before doing this it is worth noting that a cycle in headline cpi inflation is less obvious ( graph 2 ). this largely reflects the quarter - to - quarter volatility in the prices of fuel and fruit & vegetables. this volatility has been especially pronounced over recent years, partly because of the effects of cyclones larry and yasi on banana prices. 1 this volatility is also one reason that we often use the various underlying measures when assessing the ongoing inflation pressures in the economy. graph 2 at a general level, the fact that underlying inflation picked up between 2005 and 2008

speech the recovery from a very uneven recession philip lowe [ * ] governor citi ’ s 12th annual australia and new zealand investment conference sydney – 15 october 2020 it is a great pleasure to be able to join you today. it is especially good to be able to join you in person, rather than over the internet. this is the first time since february that i have been able to speak to a room of people. i hope this is another sign that the worst is behind us and that a recovery is under way. today, i would like to talk about that recovery and four interrelated factors that will shape it. these are : ( i ) how successful we are in containing the virus ; ( ii ) how effectively we deal with the shadow of the very uneven recession ; ( iii ) how willing people and businesses are to draw on their accumulated financial buffers ; and ( iv ) economic policy, including monetary policy. as we all know, the past seven months have been very difficult ones in the life of our nation. they are months that we will always remember. our lives have been affected in ways that were barely imaginable at the start of the year. the economic policy response has also been on a scale that was barely imaginable back in january. at a high level, that response has had two parts. the first has been to build a bridge to the day that the pandemic is contained and to get as many people and businesses across that bridge as possible. and the second part has been to construct the road to the recovery as the economy opens up. this has been the right strategy. it has involved the government, the rba, the regulators and the banks working closely together in the national interest. thanks to this effort and the progress on the health front, a recovery is now under way and we can look forward to this continuing. this is good news, but the shape and nature of that recovery remains highly uncertain. much depends upon how as a society we can live with the virus and the success of the scientists in terms of a vaccine, anti - viral treatments and rapid testing. there has been positive news on these fronts recently and we hope for more positive news, but success is not yet assured. so the single most important influence on the recovery is how successful we are in containing the virus. i would now like to turn to a second factor that will shape the recovery – that is the shadow cast by the very uneven nature of the recession that we have been