is, it appears likely to be lower than recent outcomes, but closer to the top than the bottom of the 2 - 3 per cent target range. with that outlook, the board decided in february to maintain the existing setting of cash rates. we will be maintaining a close watch on what incoming information tells us about the prospects for inflation. the apparent softening in underlying inflation in the december quarter was certainly very welcome, but it is not as yet clear to what extent it signals a persistent, as opposed to a temporary, phenomenon. most of the indicators we have available still suggest a very fully employed economy. so there would be some risk of inflation remaining uncomfortably high were demand growth to be unexpectedly strong in the near term. hence the outlook for demand, and the extent to which capacity constraints are easing in a range of sectors, must be key elements in forming a judgment about the outlook for inflation, and the appropriate stance of monetary policy. i turn now to payments policy, which i know is of interest to this committee. you conducted a very extensive set of hearings last year into payments issues and we believe that was very useful as a way of airing the views of the various participants. in 2002, when the payments system board announced the credit card reforms, it committed to reviewing the outcomes after five years. we will meet that commitment with a review that will take up this year and part of next. the review will be broad in scope and will include all the bank ’ s reforms to date. i know that some industry participants have expressed reservations, including to this committee, about the bank, rather than another body, conducting the review. i note that the committee was not convinced by their arguments and concluded that the bank should conduct the review. from our point of view, having publicly committed to carry out such a review, we feel we could hardly do otherwise. moreover, it would be very odd indeed for the payments system board, which has been charged by the parliament with making payments policy, to ask some other body to review its policy decisions. it is, of course, open to the parliament, including via this committee, to review the reforms in any way that it sees fit and to ask the payments system board to account for its decisions. in december last year, the payments system board announced the outline of the review, after inviting input from industry participants. the formal part of the review will begin mid year, when the bank releases an issues paper, which we hope will form the basis for an initial

round of consultations. as background to the review, we will also be undertaking some detailed research into costs and usage patterns of the various payments methods, including cash. this will update and broaden the study on costs carried out seven years ago. the review will be an open process, which will include a conference towards the end of this year bringing together policy - makers, specialist academics and industry practitioners. we plan to release our preliminary conclusions in the first part of 2008 and then we would again consult widely before making any changes to the current arrangements. we expect the review to be completed in late 2008. this is a lengthy process, but it has to be if the discussion is to be based on the facts, everyone with something to say heard, their views considered carefully and the psb to undertake proper deliberation. it is important to add that while the payments system board ’ s reforms to retail payments systems have attracted a good deal of attention, the board is concerned with a much broader set of issues, including the stability of the payments systems. the board ’ s main focus here is the operation of the high - value payments systems. these systems continue to operate with a high degree of reliability and security, but continued attention and investment on the part of the principal players, including the rba, is needed to ensure that this remains the case over the years ahead. mr chairman, that concludes my introductory remarks. my colleagues and i are here to respond to your questions.