hand, as i mentioned earlier, from a somewhat longer - term perspective it clearly will have positive effects on japan ’ s economy by reducing income transfers. in assessing the degree of achievement of the price stability target, what is important is not to focus on monthly fluctuations in specific indicators but to examine a wide range of indicators in a forward - looking manner. for example, it is important to examine whether various economic entities such as firms and households will in fact form business plans or adapt their behavior toward consumption based on the assumption of around 2 percent inflation. more generally, it is important to examine whether people ’ s medium - to long - term inflation expectations – which, under the deflation that lasted for over 15 years, are said to have consistently remained lower than those in the united states – are projected to be reanchored at around 2 percent, comparable to the level in the united states ( chart 12 ). it should be noted, however, that medium - to long - term inflation expectations are not tied to specific economic indicators, and thus are difficult to measure. it might be possible to retroactively acknowledge developments in such expectations as changes in the intercept of the phillips curve. however, one should be careful in assessing a real - time measurement – even if it can be done – with the estimation bias taken into consideration. after all, it seems that whether or not people ’ s medium - to long - term inflation expectations have changed or will change can only be judged qualitatively by, for example, behavioral patterns of various economic entities. in this regard, let me give an example of wage negotiations this fiscal year. many firms raised their base pay for the first time since the lehman shock. this was attributed not only to the government ’ s initiatives to realize wage increases, such as the setting up of three - way discussions among the government, employers, and labor unions, but also to efforts both by employers and labor unions. specifically, as economic conditions changed, as seen in the rise in the inflation rate, both sides gave renewed attention to the ultimate goal of achieving wage increases that are in line with price increases – which had been almost forgotten under deflation – and this was reflected, albeit partly, in the actual wage increases. in light of this, qqe can be assessed as exerting certain effects. obviously, if asked whether wage increases observed thus far are enough to re - anchor people ’ s medium - to long - term inflation expectations at 2 percent, i

minister andrew fisher opened the first savings account. initially, the functions were limited to commercial ones. over many years, the commonwealth bank slowly acquired central banking functions. as with many central banks, war financing brought the bank to prominence in the 1914 – 18 conflict. the note issue, initially a function of the treasury, was transferred to the bank in the 1920s. in the 1920s and early 1930s, further legislative attempts were made to strengthen the commonwealth ’ s role as central bank. at least one federal treasurer ( theodore ) made the case for a pure “ central reserve bank ”. but major progress was not made until an inquiry after the great depression outlined the intellectual foundations for the conduct of the modern central bank. the 1937 royal commission ’ s findings led in due course to major legislative change, culminating in the commonwealth bank being given explicit macroeconomic policy goals in the 1945 act. the charter given to the commonwealth bank in that act obliged it to conduct policies as to best contribute to : a. the stability of the currency of australia ; b. the maintenance of full employment in australia ; and c. the economic prosperity and welfare of the people of australia. they are the same words that are set in stone in the foyer at 65 martin place today. the same legislation, i might add, abolished the bank ’ s board, in favour of a system that effectively made the governor the sole decision - maker. the board was re - instituted in 1951 and today ’ s board in fact is the continuation of that board, with the same mix of internal and external members. yet the commonwealth bank was still also a commercial bank. various arguments were made, including by the governor of the day, as to why it was acceptable, even desirable, for the central bank both to regulate, and to compete with, the private banks. but by the late 1950s, the opposition of the private banks was intense, and our position as poacher and gamekeeper was no longer tenable. and so, at least 30 years after the discussion began about the merits of having a separate institution dedicated solely to central banking, the reserve bank of australia was established to continue the central banking activities, while the commercial functions were placed in the commonwealth banking corporation. interestingly enough, whereas in the 1930s the labor party was inclined to move ahead with developing central banking and the conservative parties had resisted it, in 1959 it was a conservative government that introduced legislation to create the reserve bank and the labor opposition voted against it. so, both parties have