underlying terms, would be in line with our 2 – 3 per cent target. next week ’ s figure will provide an insight into how things are tracking relative to that forecast. a year ago, when we thought we might be going into a significant recession, there seemed to be the possibility that inflation could fall noticeably below the target. that doesn ’ t seem very likely now, though, with a recovering economy, rising raw material prices, the labour market having stabilised and with some firms even beginning to worry again about skill shortages. given all of the above, one would not expect the setting of interest rates to be unusually low. if the economy is growing close to trend, and inflation is close to target, one would expect interest rates to be pretty close to average. the reserve bank has moved early to raise the cash rate to levels that deliver interest rates for borrowers and depositors more like those that have been the average experience over the past 10 to 12 years. those interest rates are now pretty close to that average. these increases have been fairly close together but then so were the preceding reductions. it is important to recall that the cash rate was reduced by 75 or 100 basis points at each meeting of the board in late 2008 and early 2009, for a total of 375 basis points in five months after the lehman failure in september. this was the biggest proportional decline in interest rates, delivering the biggest reduction in the debt servicing burden of the household sector, seen in australia ’ s modern history. it was an appropriate response to the situation. these changes were newsworthy, as interest rate changes always are. but as i have said before, while the changes in interest rates make the news, it is the level of interest rates that matters most for economic behaviour. eighteen months ago, the board moved quickly to establish a much lower level of interest rates in the face of a serious threat to economic activity. but interest rates couldn ’ t stay at those “ emergency ” lows if the threat did not materialise. the aggressive reduction in interest rates needed to be complemented by timely movement in the other direction, once the emergency had passed, to establish a general level of interest rates more in keeping with the better economic outlook. hence the cash rate has risen by 125 basis points over seven months – which is still only about a third the pace of the earlier declines. the board ’ s reasoning for those decisions has been set out in the various statements, minutes and so on. the question of what happens from

their industry is. either way, we see jobs being added in a range of industries. employment in health care and social assistance has been increasing for a while ; the rollout of the ndis is an important driver of this, but not the only one. more recently, we have also seen employment increase in a number of business services industries. construction employment had also been strong for a while, reaching the highest share of total employment in more than a century of records. https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 03 - 26. html 2 / 17 3 / 26 / 2019 what's up ( and down ) with households? | speeches | rba graph 2 one can be reasonably confident in the steer the labour market data are giving us, because it is coming from multiple, independently collected data sets. the employment and unemployment data come from the abs's survey of households. but a survey of businesses, also from the abs, tells us that the number of job vacancies has been a very high share of the total jobs available. separate private - sector surveys of businesses tell us that many firms plan to hire more workers. many of our own liaison contacts also tell us that they are hiring. and as the labour market gradually tightens, we are beginning to see the effects in wages growth. this has been low for some time, but is gradually trending up now, especially in the private sector ( graph 3 ). part of this shift is that fewer workers are subject to wage freezes than was the case a year or so ago. minimum and award wage rises have also increased. along with other countries, it's taking longer and a lower unemployment rate to start seeing faster wages growth than historical experience might have suggested. indeed, we still think australia is a little way off the levels of the unemployment rate that would induce materially faster wages growth. but as the experience of other countries has also shown, if the labour market tightens enough, wages growth does eventually pick up. https : / / www. rba. gov. au / speeches / 2019 / sp - ag - 2019 - 03 - 26. html 3 / 17 3 / 26 / 2019 what's up ( and down ) with households? | speeches | rba graph 3 household consumption spending is slowing in contrast to the positive picture implied by the labour market, growth in household income has been slow, and growth in consumption has weakened