. ahead of that i can provide you with the main numbers and highlight some of the issues shaping the outlook. statement on monetary policy our central forecast is for the australian economy to expand by 2¾ per cent over 2020 and 3 per cent the following year ( graph 5 ). these growth rates are a little above our current estimate of medium - term growth in australia, so some inroad into spare capacity should be made. these growth rates are also higher than the outcomes for 2018 and 2019. as i have been saying for some time, we are passing through a gentle turning point for the better. graph 5 there are a number of factors contributing to this outlook. the expected pick - up in world growth should help us, the resources sector is in expansion mode again and we are expecting consumer spending to pick up. the outlook is also being supported by ongoing high levels of investment in infrastructure and the likelihood that the downswing in residential construction will come to an end later this year. further increases in resource exports and continuing solid growth in public demand will also help. in terms of the labour market, we are expecting the unemployment rate to remain around its current level for a while yet, before declining below 5 per cent late next year as growth picks up ( graph 6 ). one consideration here is the outlook for labour force participation. over the past couple of years we have seen a very large lift in participation, especially by women and older australians. this is a positive development but it has meant that very strong employment growth has not resulted in a lower unemployment rate : strong demand for labour has been met with strong supply of labour. graph 6 in terms of inflation, we continue to expect a gradual increase, with underlying inflation expected to approach 2 per cent over the next couple of years ( graph 7 ). the recent inflation data were in line with our expectations and show contrasting trends with higher prices for groceries and continued subdued outcomes for housing, especially rents and utilities. graph 7 with that broad overview i would like to focus on three issues : 1. the ongoing adjustment in household balance sheets 2. the bushfires, the drought and the coronavirus outbreak 3. the importance of continuing to invest in our future. household balance sheet adjustment looking back at last year, economic growth was weaker than we had expected. the global slowdown is part of the story, but the most important factor is a domestic one, and that is subdued consumer spending as households adjusted to slow wages growth and falling housing prices. the downswing in

. the most important contribution the reserve bank can make to this task is to keep inflation low and stable, so that firms can respond to the shift in relative prices without their decisions being distorted by concerns about inflation in the general level of prices. the inflation targeting regime that we have had for nearly two decades provides the right framework to do this. finally, in thinking about the implications of the recent changes in relative prices an important consideration is how persistent they are likely to be. there would seem to be little benefit in changing the structure of the economy to reflect the new relative prices, only for the old set of relative prices to reassert themselves quite quickly. as the governor noted in a speech a couple of weeks ago, we cannot be sure how long the current boom in the terms of trade will last. however, given that it is being driven by structural changes in the global economy, it is likely that commodity prices will be above their average over recent decades for some time yet. if this is the case, australia will do very well. history, however, does suggest caution and we cannot be sure what the future will hold. the best way of dealing with this uncertainty is to make sure that the economy retains its flexibility to deal with whatever set of relative prices the global economy delivers us. bis central bankers ’ speeches