to hold the cash rate target unchanged at 4. 1 per cent. this decision will provide the board with more time to assess the state of the economy and the economic outlook and associated risks. the decision to hold interest rates steady this month follows a cumulative increase of 4 percentage points since may last year. this is a significant and rapid tightening of monetary policy. it is working to establish a better balance of supply and demand in the economy and thus to bring inflation down. it is worth noting that central banks in most advanced economies have also been increasing interest rates for the same reasons. so, australia is not alone here. the board is very conscious that monetary policy operates with a lag and that the full effects of the tightening to date have not yet been felt. it takes time for households and businesses to adjust their spending and investment plans, and there are still significant resets of low fixed - rate loans to come. given the lags, economic growth is expected to be subdued over the next couple of years and it will take time for inflation to return to target. it remains to be determined whether monetary policy has more work to do. it is possible that some further tightening will be required to return inflation to target within a reasonable timeframe. whether or not this is required will depend on how the economy and inflation evolve. at its next meeting, the board will have an updated set of economic forecasts from the staff as well as a revised assessment of the balance of risks. the board will also have new readings on inflation, the global economy, the labour market and household spending to help inform its decision. our priority remains to ensure this period of high inflation is only temporary. high inflation hurts all australians and damages the functioning of the economy. it erodes the value of savings, makes it harder for businesses to plan and invest, and worsens income inequality. and if high inflation were to become entrenched in people's expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. it is for these reasons that the board is resolute in its determination to return inflation to target within a reasonable timeframe and will do what is necessary to achieve that. 5 / 6 bis - central bankers'speeches our most recent set of forecasts, which were prepared in early may, have inflation returning to the top of the target band in mid - 2025. data received since then had suggested that the inflation risks had shifted somewhat to the upside

per cent. graph 5 • fourth, a significant proportion of dwelling investment appears to have gone into holiday homes or second homes. census data show that the number of dwellings built has exceeded the increase in the number of households by a large margin. as a result, the ratio of the number of dwellings to the number of households has been rising over time ; as at 2006, there were 8 per cent more dwellings in australia than there were households. presumably, most of this surplus reflects holiday houses and second houses ( graph 6 ). graph 6 in short, the apparent contradiction between the shortage of dwellings and the high investment in dwellings arises because a high proportion of dwelling investment is going into improving the quality of existing dwellings and building accommodation additional to primary residences. if as a nation we want to continue to do this, while at the same time providing enough dwellings for the growing population, the overall amount of dwelling investment undertaken will need to increase relative to gdp. that would raise important challenges for the housing industry in terms of its capacity to meet that demand. it would, of course, also raise the question of which of the other expenditure components of gdp should bear the offsetting fall in share. is there enough housing finance? let me now turn to the question of housing finance. over the past couple of years, there has been a significant change in the structure of the housing finance market, with lenders that were funding themselves through securitisation cutting back substantially on their new lending. increases in the cost of funds for these lenders made it largely uneconomic for them to lend. their declining market share has been picked up by the major banks, which now account for about 80 per cent of all new housing loans. these developments have led to concerns that borrowers may not have sufficient access to loans or that the cost of new loans may increase. however, to date at least, the evidence does not suggest that we should be overly concerned. on the question of cost, margins on standard housing loans have, if anything, narrowed a little over the past couple of years, even for the major banks. two years ago, the interest rates charged by the major banks on new variable - rate housing loans were about 190 basis points above their cost of funds. the margin today is slightly narrower. to the extent that there has been a widening in banks ’ margins it has been on their business lending. so far, it appears that there is still sufficient competition in the housing loan market for lenders not to have