, intergenerational report 2010, commonwealth of australia, canberra. for a further discussion of demographic trends in australia, see productivity commission ( 2013 ), an ageing australia : preparing for the future, commission research paper, canberra. some of this slower growth in hours is cyclical in nature. bis central bankers ’ speeches if this pattern were to continue, as seems likely, the australian economy faces a substantial challenge. over the next decade or so, if we are to achieve anything like the type of growth in real per capita income that we have become used to, then a substantial increase in productivity growth will be required. we can no longer depend on a rising terms of trade and favourable demographics to make us richer. if this lift in productivity growth does not take place, then we will need to adjust to some combination of slower growth in real wages, slower growth in profits, smaller gains in asset prices and slower growth in government revenues and services – in short, slower growth in our average living standard. so the debate about productivity should not be seen as an esoteric one just for economists. productivity growth matters and it matters a lot to our future living standards. on the positive side, we have seen some signs that productivity growth has picked up a bit recently. many firms that we talk with – particularly those affected by the high exchange rate – report that they have made serious efforts over recent years to make their operations more efficient. and, as the resources investment boom transitions to the resources exports boom, stronger growth in productivity is expected, as the production phase is often less labour intensive than the investment phase. there is thus some basis for optimism. even so, the task of generating a sustained and widespread pick - up in productivity needs to be high on our national agenda. it is a task where monetary policy can make a contribution by keeping inflation low and stable so that people can make decisions without having to worry about the distorting effects of high and variable inflation. our medium - term inflation targeting framework – which has been in place for two decades now – has achieved this and we are committed to making sure that we continue to deliver. but realistically, the additional contribution of monetary policy to improving productivity growth is only modest. the solutions clearly lie elsewhere, in the hands of both the private and the public sector. improving productivity is not simply a matter of the “ government fixing the problem ”. the private sector has a central role to play too, as it is the private sector that is the main

. 36. for an earlier discussion, see schnabel, i., ( 2020 ), “ monetary policy in changing conditions ”, speech at the second ebi policy conference on “ europe and the covid - 19 crisis – looking back and looking forward ”, frankfurt, 4 november. 37. ahmed, r. et al. ( 2024 ), “ losing traction? the real effects of monetary policy when interest rates are low ”, journal of international money and finance, vol. 141, march ; and van den end, j. w. et al. ( 2020 ), “ macroeconomic reversal rate : evidence from a nonlinear is - curve ”, dnb working paper series, no 684, de nederlandsche bank, may. 38. related, there could be a “ reversal interest rate ” at which accommodative monetary policy becomes contractionary. see brunnermeier, m. k. and koby, y. ( 2018 ), “ the reversal interest rate ”, nber working paper series, no 25406, national bureau of economic research, december. 39. berger, d. et al. ( 2021 ), “ mortgage prepayment and path - dependent effects of monetary policy ”, american economic review, vol. 111, no 9, september, pp. 2829 - 2878 ; and eichenbaum, m., rebelo, s. and wong, a. ( 2018 ), “ state dependent effects of monetary policy : the refinancing channel ”, nber working paper series, no 25152, national bureau of economic research, october. 40. bundick, b., hotz, l. and lee smith, a. ( 2023 ), “ how optimal was u. s. monetary policy at the zero lower bound? ”, research working paper series, no 23 - 14, federal reserve bank of kansas city, december. 41. gorodnichenko, y. and sergeyev, d. ( 2021 ), “ zero lower bound on inflation expectations ”, nber working paper no 29496. similarly, there is evidence that the effect of persistent deviations of inflation from target on long - term inflation expectations is not stronger at the effective lower bound. see moessner, r. and takats, e. ( 2020 ), “ how well - anchored are long - term inflation expectations? ”, bis working papers no 869.