historical experience upon which to draw. in the past 4 decades, the only time that australia has had an unemployment rate close to 4 per cent was during the peak of the resources boom. so there is some uncertainty about how aggregate wages will respond at lower rates of unemployment. given this lack of historical experience, 2 of my colleagues at the rba – james bishop and emma greenland – have approached this issue from a different angle. [ 2 ] in particular, they have examined the relationship between the unemployment rate in nearly 300 individual local labour markets across australia and the average increase in labour income in these markets using data from the australian taxation office. the results are shown in graph 12. the vertical axis shows how much growth in income in a particular labour market varies from the average and the horizontal axis shows the unemployment rate in each of the local labour markets. graph 12 employee income growth and unemployment employee income growth * ( deviation from overall average ) based on 289 local labour markets for the period 1998 / 99 – 2017 / 18 ppt 1. 5 estimated relationship 1. 0 0. 5 0. 0 - 0. 5 - 1. 0 - 1. 5 unemployment rate % * average of all labour markets with a particular unemployment rate ( to the nearest 0. 1 ppt ) in a given year ; the size of each dot is proportional to the number of region - year observations at each level of unemployment sources : abs ; national skills commission ; rba these results suggest a clear relationship : the lower unemployment is, the higher is relative income growth. this relationship is stronger when the unemployment rate in a local labour market dips below 5 per cent and strongest when unemployment dips below 4 per cent. while these results are subject to a range of qualifications, they suggest a couple of conclusions. first, tighter labour markets do generate stronger wage increases – the laws of supply and demand still work. and second, the relationship seems to be stronger at unemployment rates below 5 per cent. these are important conclusions from a policy perspective, especially given the rba's strategy is to get the unemployment rate down so that wages growth picks up and inflation returns in a sustainable way to the target range. monetary policy this brings me to our monetary policy decisions earlier this week. at our meeting on tuesday, the reserve bank board agreed to : retain the april 2024 bond as the bond for the yield target and retain the target of 10 basis points continue purchasing government bonds after the completion of the current bond purchase program in early september.

consolidation will continue. the government has shown its commitment to this process by continuing to adjust expenditure where the revenues fall below budget. additionally, the government has demonstrated its commitment to fiscal transformation with the commencement of the phased implementation of the central treasury management system, which will result in more efficient management of public sector finances. the process to divest the government of public bodies that are a drag on the budget has achieved major milestones and is continuing. with these developments, there is going to be a continuing decline in the fiscal deficit and the debt ratios. lower demand for financing from the domestic market by the government will continue to result in more and more resources being available for private sector credit. repeated success in meeting the quantitative targets under the imf - sba has led to increasing confidence about the prospects for the economy. we saw this in the strong preference for jamaica dollar assets during the fiscal year and the steady appreciation in the exchange rate. the bank ended 2010 with strong net international reserves ( “ nir ” ) of bis central bankers ’ speeches us $ 2. 17 billion, an increase of us $ 442. 1 million for the year. gross international reserves, at us $ 2. 98 billion, represented 23. 7 weeks of projected goods and services imports. in the context of the relatively stable market conditions during the year, the bank lowered the interest rate on its 30 - day certificate of deposit by 375 basis points to 6. 75 per cent by endfebruary 2011. in addition, the bank increased the pool of loanable funds in the system by reducing the cash reserve requirement for both jamaica dollar and foreign currency deposits. market - determined interest rates also trended down during the year at a faster pace than the central bank ’ s policy rate. despite emerging challenges from rising international commodity prices, headline inflation continued its progress towards the achievement of the target for the fiscal year of 7. 5 to 9. 5 per cent. statin released its inflation report for february ten days ago although this may come as a surprise to you as the news media appear to have concluded that the results in the report are not sufficiently newsworthy to be reported in a timely manner. interestingly, i read a statement in one of today ’ s newspapers that food prices rose by 25 per cent last year in an environment where the minimum wage is j $ 4, 500 per week. well, not exactly. in the same inflation report for february that was released by statin ten days ago, prices in the food category