earlier : the diffusion of new technologies and emerging skills shortages. one explanation for the widening gap between leading and laggard firms is the difficulty of employing new technologies. successfully using these technologies requires both the right management capability and technical skills. both of these can be difficult to acquire. it seems reasonable, then, to suggest that investment in human capital can both lift the rate of technical progress and accelerate its diffusion. it is therefore an important part of addressing the slow wages growth in many advanced economies, including australia. another way of encouraging the more rapid diffusion of technology is ensuring that there is strong competition in our economy. there are many other elements of the productivity debate that are also important. i don't plan to expand on them today, but the list of areas is well known. it includes : the design of the tax system ; http : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 06 - 13. html 13 / 15 13 / 06 / 2018 productivity, wages and prosperity | speeches | rba the provision and pricing of infrastructure ; the way we finance innovation and new businesses ; and our business culture around innovation, risk and entrepreneurship. we need to keep all these areas on the radars of both government and business if we are to build on the prosperity that we currently enjoy. monetary policy i would like to close with a few words on monetary policy. at its meeting last week, the reserve bank board again held the cash rate steady at 1½ per cent, where it has been since august 2016. subsequent to the board meeting, the national accounts provided confirmation that the australian economy is moving in the right direction. if this continues to be the case, it is likely that the next move in interest rates will be up, not down. it is, however, important to remember that the environment in which interest rates are increasing is also likely to be one in which people's incomes are growing more quickly than they are now. this will help. any increase in interest rates, however, still looks to be some time away. the board will want to have reasonable confidence that inflation is picking up to be consistent with the medium - term target and that slack in the labour market is lessening. at this stage, a sustained pick - up in inflation to around the midpoint of the target range is likely to require faster wages growth than we are currently experiencing. there are reasonable grounds to expect that this increase in wages growth will occur.

government bond yields % % target introduced on 19 march 2020 0. 75 0. 75 0. 50 0. 50 april 2024 0. 25 0. 25 april 2023 0. 00 j f m a m j j a s 0. 00 source : yieldbroker it is worth reiterating that there are two related but separate motivations for the bank's government bond purchases since march. the first is to achieve the board's target for the three - year australian government bond yield. the second objective is to address dysfunction in the australian and state government bond markets. the three - year yield declined reasonably quickly to the target so it didn't require large purchases to achieve the target. rather, the bulk of the purchases in march and april was to address dysfunction in government bond markets. [ 8 ] the bank purchased both australian government securities ( ags ) and semi - government securities ( semis ) out to a maturity of 10 years to help restore market function. since the bond market has returned to functioning normally, purchases have been directed to maintaining the three - year target. the bank continues to stand ready to purchase both ags and semis to help support market functioning. i said earlier that the three - year yield target is closely aligned with the board's guidance about the future direction of the cash rate target. the board has consistently stated that it will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2 – 3 per cent target band. in the august, the forecast was for the unemployment rate to rise to 10 per cent at the end of the monetary policy https : / / www. rba. gov. au / speeches / 2020 / sp - dg - 2020 - 09 - 22. html statement on 9 / 13 22 / 09 / 2020 the australian economy and monetary policy | speeches | rba year and ( in the central scenario ) to decline gradually to be 7 per cent by the end of 2022. while the recent labour market release indicates outcomes could be better than this, there would still need to be a significant further decline in the unemployment rate before the australian labour market would be nearing full employment. prior to the pandemic, the unemployment rate was around 5 per cent. that was not low enough to generate sufficient wage growth consistent with achieving the inflation target. under the central scenario, it would be more than three years before sufficient progress was being made towards full employment