loss of incomes and jobs would be even more pronounced. whatever the timing of the recovery, when it does come, we should not be expecting that we will return quickly to business as usual. rather, the twin health and economic emergencies that we are experiencing now will cast a shadow over our economy for some time to come. it is highly probable that the severe shocks we are now experiencing will change the mindsets of some people and businesses. even after the restrictions are lifted, it is likely that some of the precautionary behaviour will persist. and in the months ahead, we are likely to lose some businesses, despite best efforts, and some of these businesses will not reopen. there will also be a higher level of debt and some households might revaluate the risks of having highly leveraged balance sheets. it is also probable that there will be structural changes in the economy. we are all learning to work, shop and travel differently. some of these changes will probably stay with us, requiring a rethinking of business models. so the crisis will have reverberations through our economy for some time to come. the best way of dealing with these reverberations is to reinvigorate the country ’ s growth and productivity agenda. as we look forward to the recovery, there is an opportunity to build on the cooperative spirit that is now serving us so well to push forward with reforms that would move us out of the shadows cast by the crisis. a strong focus on making australia a great place for businesses to expand, invest, innovate and hire people is the best way of extending the recovery into a new period of strong and sustainable growth and rising living standards for all australians. the reserve bank ’ s policy response i would now like to change tack and turn to the reserve bank ’ s policy response. to recap, that response has had five elements : 1. a reduction in the cash rate to 25 basis points with forward guidance that the cash rate will not be increased until we are making sustainable progress towards our goals for full employment and inflation 2. the introduction of a target for the yield on 3 - year australian government bonds of 25 basis points, and a preparedness to buy government bonds in whatever quantities are needed to achieve that target 3. the introduction of a term funding facility, under which authorised deposit - taking institutions ( adis ) have access to funding from the reserve bank for three years at 25 basis points, with additional funding available if adis increase

. total hours worked in australia are likely to decline by around 20 per cent over the first half of this year. the unemployment rate is likely to be around 10 per cent by june, although i am hopeful that it might be lower than this if businesses are able to retain their employees on lower hours. the unemployment rate would have been much higher than this without the 1 / 5 bis central bankers'speeches government ’ s jobkeeper wage subsidy. these are all very large numbers and ones that were inconceivable just a few months ago. they speak to the immense challenge faced by our society to contain the virus. in terms of inflation, we are also expecting a significant decline in the june quarter. the large fall in oil prices, combined with the introduction of free childcare and the deferral or reduction in some price increases mean that it is quite likely that year - ended headline inflation will turn negative in june. if so, this would be the first time since the early 1960s that the price level has fallen over a full year. in underlying terms, however, inflation is expected to remain positive. as the economic data roll in over coming months, they will present a very sobering picture of the state of our economy. there will be many reports of record declines in economic activity. as australians digest this economic news, i would ask that we keep in mind that this period will pass, and that a bridge has been built to get us to the other side. with the help of that bridge, we will recover and the economy will grow strongly again. that bridge has been partly built with the help of australia ’ s strong balance sheets – in particular, the strong balance sheets of our governments, our private banks and of the reserve bank. australia ’ s long record of responsible fiscal policy has allowed the government to use its balance sheet to help smooth out the income shock and to offer protection to those most affected. in doing so, it is making a major difference. the strong balance sheets of our banks are also helping. by offering payment deferrals and concessional terms, our banks are rightly acting as shock absorbers and helping the country through this difficult period. and as i will speak about in a few minutes, the reserve bank itself is using its balance sheet to keep funding costs low and credit available to both businesses and households. without these strong balance sheets, we would have been in a more difficult position. i would now like to turn to the speed and nature of the