rates here in australia too. the board has also been conscious that the low rates mean low returns for many savers. in addition, the board has paid close attention to developments in household balance sheets and the housing market. over the course of 2016, there has been some lessening of the concerns that were building up last year. aggregate credit growth slowed, as did the rate of housing price appreciation. lending standards were also tightened. these developments meant that the board felt that the lowering of the cash rate would improve prospects for sustainable growth and achieving the inflation target without creating unacceptable risks on the financial side. over the past couple of months, the board has held the cash rate steady at 1. 5 per cent. we have continued to carefully examine the incoming flow of data. on balance these data suggest that the economy is continuing to adjust reasonably well to the downswing in mining investment. this downswing still has some way to go, but the end is now in sight. and recently, commodity prices have picked up, which is a marked change from the large declines in prices we have seen for some years. measures of business and consumer sentiment are also slightly above average. in terms of inflation, we have been looking carefully at the various measures of inflation expectations, which have clearly declined, although not to unprecedented levels. the experience elsewhere suggests that we do need to guard against inflation expectations falling too far, for if this were to occur it would be more difficult to achieve the inflation target. of course, one of the key influences on inflation expectations is the actual outcomes for inflation. we will get an important update next week, with the release of the september quarter cpi. in terms of the labour market, as i said earlier, the picture is mixed. the unemployment rate has 12 / 13 bis central bankers'speeches drifted down, but growth in hours worked is weak and many part - time workers would like to work longer hours. wage pressures remain weak, although there are some signs that the downward pressure on average wages from workers moving out of high - paying mining - related jobs might be coming to an end. the recent data on the housing market are also mixed. prices seem to be increasing quite briskly again in some areas, although are falling in others. growth in rents is very low and there is a big increase in housing supply still to come. to add to the picture, credit growth is still exceeding income growth, although by a smaller margin than last year. it is also noteworthy that much of this

credit is being used to finance new housing construction rather than consumption. it is a complex picture. so these are the issues we have been focused on. at its most recent meeting, the board reached the judgement that holding the cash rate at 1. 5 per cent was consistent with sustainable growth in the economy and achieving the inflation target over time. we will, of course, continue to review that judgement at future meetings. conclusion we continue to live in unusual times. inflation is quite low and growth in labour costs has been very subdued. while this largely reflects the usual cyclical factors, to some extent there is more than that going on. the low inflation outcomes around the world have posed some challenges for policy frameworks, including inflation targeting. but our flexible medium - term target has served us well. the reserve bank can contribute to stability and confidence in the australian economy by continuing to be guided by this framework, which has proved its worth for over two decades now, and to use the flexibility afforded by the framework to respond sensibly to the situation we face. of course, we have to explain that response and i hope these remarks today have assisted in that regard. i remain confident that the framework we have, sensibly operated, will guide us to prudent decisions in pursuit of what is, after all, the ultimate goal of our policy : the welfare and prosperity of the people of australia. thank you. 1 see ballantyne a and s langcake ( 2016 ), ‘ why has retail inflation been so low? ’, rba bulletin, june, pp 9 - 17. 2 see section 10 ( 2 ) of the reserve bank act 1959 ( < www. legislation. gov. au / details / c2015c00201 > ) 13 / 13 bis central bankers'speeches