risk having talked about two major near - term risk for the economic outlook, i would also remind you to take appropriate account of one risk that plays out over a longer horizon, namely climate risk. i talked about this in detail earlier in the year. [ 3 ] given your roles as risk managers, it is important that you have a useful framework to assess this risk to your business. climate is a challenging risk to assess but an increasingly necessary one. businesses need to take account of both the physical risks and the transition risks. physical risk is about the direct impact of climate on your business and the assets that it holds. what will be the effect of climate change on the price of an asset my company owns, particularly if it is a long - lived asset such as, for example, a mortgage? transition risk is about the potential effects to businesses as the country and the economy adjusts to the changes in the climate. this includes the adjustment to policy responses required to meet the paris objectives. as risk managers, you can bring your skills at calculating the expected future value of financial assets across a number of potential scenarios. in that sense, climate risk is not that different from other risks, though the challenge of translating uncertain future paths for the climate into paths for the economy and the prices of financial assets is harder than some of the other risks that you generally deal with. but it a challenge that needs to be confronted. is i would emphasise the importance of disclosure, echoing the comments by geoff summerhayes of apra and john price of asic, as well as the information that asic released earlier this week. [ 4 ] you should all be aware of the recommendations of the recent report of the task force on climaterelated financial disclosures ( tcfd ) chaired by michael bloomberg. it is important not just to have disclosure for disclosures sake, but to have consistent and informative disclosure. investors need to https : / / www. rba. gov. au / speeches / 2019 / sp - dg - 2019 - 08 - 15. html 8 / 10 8 / 15 / 2019 risks to the outlook | speeches | rba be able to take account of that information in making their decisions, and be able to compare that across companies and across financial assets. risk management under uncertainty is always challenging, but the challenge can be reduced with better and consistent information both in terms of the data inputs and the consistency of the scenarios considered. interest rate benchmark reform the final issue i

carney has pointed out how global influences will shift the phillips curve both lower ( due to the positive supply shock from increased product and labour market integration ) and flatter ( due to integration of global value chains, increased competition and contestability of product and labour markets ). the downward shifts, which will persist as long as integration continues, are disinflationary, pointing to running the domestic economy at tighter spare capacity to meet the inflation target. for the policymaker a flattening of the phillips curve poses a more difficult challenge than under - measurement of labour utilisation or a lowering of the natural rate or of inflation or real pay expectations ( chart 9 ). the latter pose the challenge of judging the timing of policy action right ; excess ( deficient ) demand for labour will drive pay up ( down ) as before as unemployment falls ( rises ). but the point – i. e. the level of unemployment and the rate of growth of pay – at which that will happen is lower. getting the timing of monetary policy right is a formidable challenge for the monetary policy maker. but it is a familiar one. a flatter curve on the other hand, not only affects the timing of the build - up of pay pressure as unemployment falls and hence the timing of policy action. it affects also the sensitivity of pay pressure to unemployment and hence the degree of policy action necessary to bring inflation to target. if the curve is pretty close to flat, monetary policy will have to work very hard to affect domestically generated inflation. as borio, and other, have noted this may bring into question the very ability of central banks to meet their inflation targets. there is no curve the phillips curve framework has been a central part of our thinking about the economy for over 50 years. but it has not always been that way. keynes, after the great depression, posited a world where absent government intervention labour markets did not clear even with lags. in this world unemployment could get stuck at high levels even though wages fell and fiscal policy was therefore required to bring unemployment down. and it is true also that the phillips curve framework has had to be adapted and extended substantially over the past 50 years to maintain its explanatory power in the face of the actual evolution of pay growth and unemployment over the period in a range of countries. carney ( 2017b ) all speeches are available online at www. bankofengland. co. uk / speeches we cannot exclude other possibilities. roger farmer for