just as much about achieving the maximum possible sustainable level of employment in australia. unemployment is a major economic and social problem and the board places a high priority on a return to full employment. there is, inevitably, some uncertainty about exactly what constitutes full employment in our modern economy. over the past decade, the estimates of the unemployment rate associated with full employment have been repeatedly lowered both here and overseas. so there is uncertainty. but based on this experience, it is certainly possible that australia can achieve and sustain an unemployment rate in the low 4s, although only time will tell. as we progress towards full employment, we will be relying on the wages and prices data to provide a signal as to how close we are. the current signal is that we are still a long way away from full employment. consistent with the judgement that the condition for an increase in the cash rate is unlikely to be met before 2024, the bank remains committed to the 3 - year yield target. we are not considering removing the target or changing the target from 10 basis points. the board has, though, discussed the question of whether to keep the april 2024 bond as the target bond, or to move to the next bond – that is the november 2024 bond – later this year. if we were to keep the april 2024 bond as the target bond, the maturity of the yield target would gradually decline as time passes until the bond finally matures in april 2024. the board has not yet made a decision on this 15 / 17 question and will consider it again later in the year when it has more information about the economic recovery and the labour market. later in the year, the board will also consider the case for further extending the bond purchase program. we are prepared to undertake further bond purchases if that is required to reach our goals. until then, we remain prepared to alter the timing of purchases under the current programs in response to market conditions. we did this last week when liquidity conditions deteriorated and bid - ask spreads widened noticeably, and will do so again if necessary. at its recent meetings, the board has also discussed developments in the housing market, including the rising housing prices across most of the country. there are many moving parts at present : record low interest rates ; a shift in preferences towards houses and away from apartments ; strong demand for housing outside our largest cities ; large government incentives for first - home buyers and home builders ; and the slowest population growth in a century. time will tell as to

monetary policy. as that picture has gradually emerged over the past few months, the question has then arisen as to when the stance of monetary policy should be recalibrated as well. at its august meeting the board believed, and stated, that conditions were evolving in a way that was increasing the scope to move towards a less restrictive policy setting – one that presses less firmly on the brake. at the september meeting the board took a step in that direction. the logic of this decision was the same as the one that, some years earlier, had led the board to begin raising rates from unusually low levels : the setting of policy designed to get the economy to change course probably will not be the right one once the change of course has occurred, and it will need to be adjusted. a further consideration was that conditions recently had actually tightened marginally as a result of rises in lenders ’ interest rates, which from a macroeconomic point of view was not needed. accordingly, the cash rate was reduced by 25 basis points last week. the decision was quite widely anticipated, and less restrictive conditions in the money market had already been in place for about a month before the board ’ s decision. since the end of july, key benchmark interest rates have fallen quite noticeably. the rate on 90 - day bank bills has fallen by almost 60 basis points, while the three - year swap rate has fallen by about 80 basis points. various rates for fixed - rate loans had already declined before the board ’ s decision, while variable mortgage rates have quickly reflected the decline in the cash rate. the exchange rate has also declined. while some of this change is really a us dollar story rather than an australian dollar story, our currency has declined somewhat against other currencies and on a tradeweighted basis. admittedly, we are probably six months away from seeing clear evidence that inflation has begun to fall, and even then it has to fall quite some distance before it is back to rates consistent with achieving 2 - 3 per cent on average. a somewhat larger fall in inflation overall is required on this occasion than was the case in either 2001 or 1995, which were the comparable previous episodes, since the peak inflation rate this time is higher. rather than trying to achieve that larger fall in inflation by pushing it down more quickly, the board ’ s strategy is to seek a gradual fall, but over a longer period. this carries less risk of a sharp slump in economic activity, though it does require a longer period of