on lags luci ellis assistant governor ( economic ) remarks at the australian national university canberra – 17 august 2018 on lags i ’ d like to thank the australian national university for providing the opportunity to speak to you tonight. anu is one of my three alma maters, and i ’ m pleased to be able to engage once again with the university community. it ’ s important that central banks and the academic community collaborate. we can learn a lot from each other. i ’ m conscious that this talk was originally scheduled to take place almost exactly a year ago, but i had to cancel due to illness. that seems especially pertinent on this occasion, because my topic tonight is lags. by choosing this topic, i hope to encourage those of you who engage in economic analysis of any kind, and the broader academic community, to think carefully about time, and in particular, about how the passage of time is built into your analysis. i want to talk about lags : where they come from ; how they might change ; and what they might be telling us. this is more than just an academic point about what our models should look like, though. understanding lags is central to day - to - day analysis and interpretation of economic developments. as such, they are central to our work in economic policy. before i get to that, i ’ d like to make some brief remarks about the current situation. we released the statement on monetary policy last week, and earlier today the governor and some others of us appeared before the house of representatives standing committee on economics. i don ’ t have anything new to add but thought it would be worth summarising the main messages from the statement and the testimony. unemployment is still a bit higher than our estimates of the rate consistent with full employment. inflation is still a bit low. it is therefore appropriate that monetary policy should be supporting the economy right now. but the australian economy is growing a bit above trend, which has helped the progress on getting unemployment down and seeing inflation return closer to the midpoint of the bank ’ s target. the world economy is continuing to expand at a good rate and that is also helping. we expect further progress on both the inflation and unemployment fronts over the period ahead. if things turn out broadly as we expect, it is therefore more likely that the next move in the cash rate will be up than down. that progress on getting unemployment down and inflation up is likely to be only gradual, however. so any

this direction over recent times. these steps include : efforts to simplify prospectus requirements for retail vanilla bonds and ease the personal liability of company directors ; improving market transparency through the rba ’ s publication of new measures of corporate bond yields ; the lengthening of the government bond curve ; and the listing of certain fixed - income securities on the australian securities exchange. these are all welcome developments. conclusion in conclusion, let me try to briefly summarise. bank - based finance remains the dominant form of finance for australian companies. superannuation funds have been prepared to finance banks and have effectively outsourced the credit assessment function for much of the corporate sector. partly as a result, the development of a deep and liquid corporate bond market is still a work in progress. but an equally important observation is that we do have the infrastructure that could support a strong and very active bond market in times of stress or inadequate competition. in this way, this infrastructure provides a form of insurance. we need to make sure that we nurture this infrastructure so that we can continue to be confident that the corporate bond market will be there when it is most needed. given this perspective, i think it is probably better to think of markets and institutions as being complements, rather than as being engaged in some type of struggle for supremacy. thank you very much for listening. bis central bankers ’ speeches