can be harder to assess. the waves are in many ways the hardest. by definition, they persist for some time, so you know you need to take them into account in your view of the outlook, even if you didn't anticipate their beginnings. but because they have such pervasive effects, it is often unclear exactly to take them into account. how the signal in the noise lumps and bumps are in some sense both noise. in principle, noise should wash out of the total figures. but in real - world economies, it doesn't. like pop songs or movies, where a few blockbuster hits far overshadow the long tail of minor releases, industries and economies also often follow something like a ‘ power law ’, with a large number of small entities and a small number of very large ones. this kind of structure is probably more prominent in a country like australia than a larger, more diverse economy like the united states. what's important, though, is that idiosyncratic shocks to a large entity can be enough to affect the total, on its own or by propagating to other entities. https : / / www. rba. gov. au / speeches / 2019 / sp - so - 2019 - 10 - 04. html 2 / 13 10 / 4 / 2019 lumps, bumps and waves | speeches | rba when thinking about how these lumps and bumps affect the economy, and our forecasts, it's important to consider what the bounce - back looks like. we need to ask : is this a shock to the level, or to the growth rate? consider the case where a natural disaster or some other event disrupts production at a particular facility. when things return to normal, is there a period of catch - up, where production is temporarily higher than normal? or does production just revert to the previous normal level, in which case the production that would otherwise have occurred in the disrupted period is simply lost? or is the effect on production levels more permanent, so that the growth rate returns to normal, but the level of production now follows a persistently lower trend track? these lumps and bumps can affect how you interpret the data, and they're not always about natural disasters. a recent example can be seen in public sector wages growth. the bank has for some time been noting that government wages policies are restraining wages growth in the public sector. in some cases, these policies also apply to workers in

the private sector doing work on behalf of governments, such as on construction projects or in parts of the health sector. so it might have been thought a little surprising that public sector wages growth actually picked up noticeably in the june quarter of this year. but it wasn't a surprise – it was a fully anticipated lump. a longstanding agreement to bring wages of victorian nurses and midwives in line with those in new south wales accounted for essentially all of this pick - up in the growth rate ( graph 1 ). and because it is an adjustment to the wage in subsequent quarters. level, we expect the rate of wages growth to fall back to its recent averages graph 1 https : / / www. rba. gov. au / speeches / 2019 / sp - so - 2019 - 10 - 04. html 3 / 13 10 / 4 / 2019 lumps, bumps and waves | speeches | rba a ‘ lump ’ like this is relatively easy to anticipate and incorporate into your analysis, as long as you know it is happening. that isn't always feasible : sometimes lumps, such as large investment projects or certain wage deals, are not public information, or at least not until after they've happened. by contrast, natural disasters are the canonical example of bumps that you can't fully predict, but you can anticipate as a possibility. and it's obvious when they've happened. the effect of the drought on rural production and food prices is a good example of this. so were the two recent disasters affecting the iron ore market. the early months of the year are cyclone season in the pilbara, so some disruptions to production can be reasonably anticipated, but cyclone veronica was far more disruptive than most. together with the brazilian mine disaster, this greatly reduced supply into the seaborne market for iron ore ( graph 2 ), and boosted iron ore prices. because iron ore is such an important export for australia, export revenue, the terms of trade and fiscal revenue all increased noticeably. and yes, this means some things didn't turn out as we had forecast. graph 2 weather - related and other disasters aren't the only cause of bumps. sometimes people's actions are the root cause. these can be as prosaic as maintenance schedules that affect shipments of exports, or as alarming as the recent attacks on saudi oil facilities. the impact of these events depends on how sustained the effect on production and prices will be. higher