the public sector has been steady at around 2½ per cent ( graph 8 ). overall, though, wages growth remains lower than the rate that would appear consistent with inflation being comfortably within the target range. even in new south wales and victoria – where the unemployment rates have averaged around 4½ per cent over recent times – wages growth has been running at just 2½ per cent. it would appear that some of the global factors that i mentioned earlier are working here as well. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 05 - 21. html 9 / 16 5 / 21 / 2019 the economic outlook and monetary policy | speeches | rba graph 8 putting these various elements together, our central scenario – as outlined in our recent statement on monetary policy – is for the australian economy to grow by 2¾ per cent over both 2019 and 2020 ( graph 9 ). as always, though, there is a range of uncertainty around this forecast. but the central outlook is for growth at around our estimate of potential growth in the australian economy. given this, over these two years the unemployment rate is forecast to be around 5 per cent. in 2021, the central forecast is for slightly better outcomes, partly due to a pick - up in the resources sector. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 05 - 21. html 10 / 16 5 / 21 / 2019 the economic outlook and monetary policy | speeches | rba graph 9 it is worth pointing out that when preparing these forecasts, we used our normal technical assumption that interest rates would move broadly in line with market pricing. at the time the forecasts were prepared, market pricing implied that the cash rate was expected to decline to 1 per cent over the next year. if, instead, we had used an assumption of unchanged interest rates, the growth forecast would have been lower and the forecast for unemployment would have been higher. turning now to inflation, the outcome for the march quarter was noticeably lower than we had expected. in year - ended terms, headline inflation was 1. 3 per cent and in underlying terms it was around 1½ per cent ( graph 10 ). looking through the details of the cpi, there appear to be only limited inflation pressures across much of the economy. the low rates of wages growth are contributing to relatively low rates of inflation in the services sector. rent inflation is also the lowest it has

area economic environment ( see slide 7 ), focusing on developments in the corporate and household sectors that are particularly relevant from the point of view of the outlook for financial intermediaries ’ credit portfolios. starting with the corporate sector, there are signs that earlier weaknesses in demand for external funding by the non - financial corporate sector is coming to an end. this is reflected by the increase in lending. at the same time, reflecting the better financial condition of firms, credit standards by banks to firms have been relaxed somewhat, as shown in the chart on the left on slide 7 ( where the vertical axis measures changes ). encouragingly, these developments also extended to small and medium - sized enterprises, which in many euro area countries had faced difficult circumstances over the past few years. overall, euro area corporate sector balance sheets show signs of improvement, after several years of de - leveraging and extensive cost - controlling. turning to the household sector, the most important development continued to be further rises in house prices in many euro area countries and in the euro area as a whole, as shown in the chart on the right on slide 7. however, prices continued to fall in some countries, while in others, where house prices increased rapidly in the past, prices have shown signs of moderation. given the relative robustness of household sector balance sheets in the euro area and the still, on average, conservative loan - to - value ratios applied to mortgage lending, more substantial credit risks to financial institutions would materialize only in the currently rather unlikely event of a simultaneous increase in unemployment and a fall in house prices. nevertheless, against the backdrop of signs of further relaxation of credit standards and the possibility of a substantial negative impact of a potential fall in house prices in some euro area countries on their financial systems, the housing market warrants further close monitoring. ii. 4. financial institutions consolidated data on the euro area banking sector ’ s financial results are available for the full year of 2004. the figures, further supported by non - consolidated data for the first half of 2005, paint a picture of strong profit growth and comfortable solvency ratios ( see slide 8 ). in 2004, the average return on equity ( roe ) for euro area domestic banks, the main indicator signalling increased profitability, increased by almost three percentage points from 2003, reaching 10. 5 %. the chart on the left on slide 8 illustrates that in addition to the increase in average profitability, the distribution of roe for euro area banks shifted in the direction