##mark reform. this is why the reserve bank worked with isda as fallback provisions for credit benchmark rates were being developed. we needed to ensure that our local credit - based benchmark, bbsw, was included in the isda fallbacks and protocol. in time, the reserve bank will require securities that reference bbsw to include the relevant isda fallback provisions in order to be eligible as collateral in our market operations. i know that there is a lot of good work already underway in industry towards developing market conventions in this area – including by the asf. in the period ahead, we will be seeking views from market participants on how and when we are going to implement this new eligibility requirement for our market operations. bbsw in the context of global benchmark reform australia ’ s local credit - based benchmark bbsw remains robust. a lot of work has gone into strengthening the methodology underlying its calculation and the supporting infrastructure and market practices. this has allowed australia to pursue a multiple - rate approach for our local reference rates. this means that, unlike for libor, regulators in australia aren ’ t advocating a wholesale transition to referencing the risk - free rate, which in australia ’ s case is the cash rate, also known as aonia. 2 / 4 bis central bankers'speeches instead, we expect market participants to choose robust reference rates that best suit each of their products and situations, taking into account their own and their clients ’ needs or hedging strategies : in some cases, referencing the cash rate will make sense. floating rate notes issued by governments, non - financial corporations and securitisation trusts are possible examples. but in other cases, a credit - based benchmark, like bbsw will continue to make sense. floating rate notes and corporate loans issued by banks are examples of this. but as i ’ ve said before, not all bbsw tenors are as robust as others. 5 in particular, the 1month bbsw is largely a buy - back market. accordingly, it is less liquid than other tenors. so users of 1 - month bbsw should be considering using alternative benchmarks given the lack of liquidity in this market. it ’ s also worth noting that for some products, approaches adopted widely by market participants offshore will have an important bearing on the reference rates we are likely to end up using here. so regardless of the robustness of bbsw, we can expect to see a shift towards referencing risk - free rates in australia

low inflation outcomes. the more flexible supply side means that employment growth can be stronger without fears of overheating. at the same time, the unemployment rate that would put upward pressure on inflation is also lower than it once was. as the evidence accumulated in support of these propositions, the outlook for monetary policy changed and the board lowered the cash rate in june and july. in making these decisions the board also recognised that the earlier concerns about the trajectory of household debt had lessened. the board has also paid attention to the shift in the outlook for monetary policy globally. these two recent reductions in the cash rate will support demand in the australian economy. so too will recent tax cuts, higher commodity prices, some stabilisation in the housing market, ongoing investment in infrastructure and a lift in resource sector investment. we also need to remember that the underlying foundations of the australian economy remain strong. it remains to be seen if future growth in demand will be sufficient to put pressure on the economy's supply capacity and lift inflation in a reasonable timeframe. it is certainly possible that this is the outcome. but if demand growth is not sufficient, the board is prepared to provide additional support by easing monetary policy further. however, as i have discussed on other occasions, other arms of public policy could also play a role in this scenario. whether or not further monetary easing is needed, it is reasonable to expect an extended period of low interest rates. on current projections, it will be some time before inflation is comfortably back within the target range. the board is strongly committed to making sure we get there and continuing to deliver an average rate of inflation of between 2 and 3 per cent. it is highly unlikely that we will be contemplating higher interest rates until we are confident that inflation will return to around the midpoint of the target range. thank you for listening. i look forward to answering your questions. https : / / www. rba. gov. au / speeches / 2019 / sp - gov - 2019 - 07 - 25. html 13 / 14 7 / 25 / 2019 inflation targeting and economic welfare | speeches | rba endnotes [ * ] i would like to thank ellis connolly for assistance in preparing these remarks. conceptually, it is possible to think of these structural factors as adding to global supply, so this third explanation could be seen as elaboration of the second explanation. these structural factors are also likely to be pushing down the equilibrium real rate of interest. simon j and m sutton (