consumption was holding up. the labour market was tight, supporting household incomes. at the same time, inflation was at multi - decade highs and interest rates were rising. while this was impacting consumer confidence, we were yet to see much of an impact on consumer spending and business confidence was high. higher consumer prices, rising interest rates and falling housing prices were all expected to increasingly weigh on consumption. in this environment our forecasts were for growth to slow in 2023. in line with this we were forecasting the unemployment rate to gradually increase over the forecast period. inflation was forecast to peak at 7¾ per cent at the end of 2022 before gradually moving back to the top of the target band by the end of 2024. key developments since august there have been a number of developments that have led us to revise our forecasts since august, although the extent of revisions has been reasonably modest compared with the experience of recent years. on the international front, the prospects of a significant slowing in the global economy have intensified. this reflects a number of factors. inflation has stayed persistently high, which has resulted in an upward revision of the outlook for policy rates in a number of advanced economies. there has already been a fast and simultaneous rise in policy rates, and many central banks have indicated that they will do what it takes to get inflation back down to their targets. the energy crisis in europe has also led to a further downgrade of growth in the euro area and the united kingdom. expectations for growth in advanced economies are, therefore, a bit weaker than three months ago, and much weaker than was the case at this time last year ( graph 1 ). and finally the outlook for china has been downgraded. overall growth in australia ’ s trading partners is expected to be slightly below 3½ per cent in 2022 and 2023 – well below its pre - pandemic decade average of 4½ per cent. graph 1 gdp level forecasts * december 2021 = 100 index g7 major trading partner east asia * * nov 2021 smp current index * * * dashed lines represent forecasts. major east asian economies excluding japan. sources : abs ; ceic data ; consensus economics ; rba ; refinitiv turning to the domestic economy, the recent flooding in south eastern australia has been disastrous for many households and businesses. the murray - darling basin received a record volume of rain in october following wellabove - average rainfall earlier in the year ( graph 2 ). the full

has been expressed that an expanded role by central banks in this direction could compromise their independence that is so critical in defending their primary objective of price stability. that may indeed be a risk. but precisely because central banks are generally among the most independent institutions, they can strengthen the independence of the supervisory environment. the risk of political pressure delaying a needed tightening in credit conditions via macro - prudential tools, for example, can be minimised if the central bank has a key role. in my view, this benefit, together with the benefit of informational synergies, outweigh the risks. * * * i close with a very old lesson for central banks : humility. this crisis was not just a once - in - ageneration crisis. it proved to be much worse. i hope subsequent relative calm allows our 22nd century counterparts to characterise this as a once - in - a - century event. but central banks must not let their guard down. the next crisis might well challenge the limits of our knowledge in new and as yet unknown ways. references williams, john c. ( 2009 ) “ the risk of deflation ”, frb san francisco economic letter, 12, 27 march. bis central bankers ’ speeches bis central bankers ’ speeches