inflation expectations using a moving average of past inflation, while the latter assumes that inflation expectations are “ rational ” and consistent with the predictions of a structural model of the entire economy. some adherents of either type of phillips curve argue that their preferred model can explain the behavior of inflation during and after the financial crisis. for example, gordon ( 2013 ) presents evidence in favor of an accelerationist model, while del negro, giannoni, and schorfheide ( 2015 ) make this claim for a new keynesian model. 18 see blanchard ( 2016 ) for evidence on how the responsiveness of inflation to resource utilization has changed over time. interestingly, research suggests that this sensitivity began declining well before the crisis. 19 for an early discussion of the potential macroeconomic effects of downward nominal wage rigidity, see akerlof, dickens, and perry ( 1996 ). more recently, daly and hobijn ( 2014 ) develop a model in which the reluctance or inability of firms to cut nominal wages ( or both ) creates important nonlinearities in the relationship between labor utilization and wage inflation. finally, fallick, lettau, and wascher ( 2015 ) review the evidence for downward nominal wage rigidity in recent years and explore the ways in which it has interacted with labor market stress over time. 20 specifically, survey measures of long - run inflation expectations are broadly correlated with estimates of inflation ’ s longer - term trend. see clark and davig ( 2008 ) ; see also faust and wright ( 2013, who make a related point in the context of inflation forecasting. 21 as mavroeidis, plagborg - moller, and stock ( 2014 ) conclude from their exhaustive survey, empirical estimates of the new keynesian inflation equation are “ unable to pin down the role of expectations in the inflation process sufficiently accurately for the results to be useful for policy analysis ” ( p. 172 ). 22 for a discussion of the theoretical and empirical influence of monetary policy on inflation in the context of a formal inflation - targeting regime, see bernanke and others ( 1999b ). 23 see kiley ( 2008 ) for a discussion of the relationship between u. s. monetary policy and survey measures of long - run inflation expectations ; his results suggest that it took many years for the federal reserve to succeed in anchoring long - run expectations at a low level. in a similar vein, bernanke and others ( 1999b ) conclude that inflation expectations “ respond

per cent in 2022. it is certainly possible that the economy will do better than our central scenario. this scenario does not envisage a vaccine being widely available to most australians until late next year at the earliest. it also assumes that significant restrictions on international travel are still in place at the end of 2021. recent medical breakthroughs give us some hope that things will work out better than this. if so, confidence would lift and there would be a further easing of restrictions. the result would be an upside surprise to growth and jobs, especially given the significant policy stimulus that is already in place, the generally strong balance sheets and the substantial government incentives for businesses to employ people and invest. but it is also possible that things could go the other way. europe provides a salutary reminder of this. it was just 3 months ago that many commentators were remarking on the robust bounceback in europe. now, the european economy is expected to contract again in the december 1 / 4 bis central bankers'speeches quarter as countries struggle to contain the virus. similarly, in the united states the outlook is clouded by the sharp increase in case numbers there. fortunately, here in australia, we look to be on a different path, but there is no guarantee that we will remain so. this inevitably means that there is still a high degree of uncertainty about the outlook. what has become clearer, though, as time has passed is that australia is likely to experience a run of years with unemployment too high and wage increases and inflation too low, leaving us short of our goals. in the current environment, addressing the high rate of unemployment is a priority for the reserve bank board. we are intent on doing what we can, with the tools that we have, to help here. this brings me to our recent monetary policy decisions. recent monetary policy measures since the previous hearing in august, significant policy announcements were made following the board ’ s meetings in september, october and november. we made no further changes at our meeting yesterday. in september, the board increased the size of the term funding facility and allowed authorised deposit - taking institutions ( adis ) more time to draw on this facility. institutions can now access funds up to the equivalent of 5 per cent of their total loans, with additional funds available if an adi increases its lending to businesses, especially small and medium - sized businesses. in october, we changed the nature of our forward guidance about the cash rate. the focus is now on actual outcomes for inflation and unemployment