, not inflationary. that balance of forces will shift as the recovery unfolds. if we were to misjudge the balance of deflationary and inflationary forces during the recovery, the economy could pick up too much steam and inflation could rise. we are alert to this risk and have the tools to respond should it materialize. but at present we see the risk of disinflation as more immediate. it was in the context of the unknowable scope of downside risk for the economy and inflation that i coined the phrase, “ no one has ever criticized a firefighter for using too much water. ” as you can see, scenario planning has played a central role in our response to the crisis so far, and i expect that will continue. those scenarios will come into better focus as we see new data, but it will be some time before we get back to our normal forecasting environment. certainly, we will need to monitor and adjust for any structural damage judgmentally. throughout, our inflation target is the anchor to our activities. inflation targeting offers investors and households an anchor for the future. it tells people that the bank will work as hard as it can to get the economy stabilized and back on track, so as to prevent inflation from falling significantly below target for an extended period. it is that anchor and our independence from government that gives our lending programs the power to stabilize things. at present we face asymmetric risks, as the downside risks are far more dire than the upside ones. this simplifies our risk management problem for the time being. under normal circumstances, we would also be concerned with adding to financial vulnerabilities. after all, lower interest rates are intended to promote increased borrowing and therefore spending. we have not forgotten about financial vulnerabilities — we will put more weight on them in our risk management framework once we are confident that our primary objective will be met. to conclude, here are some of the lessons for central banking i take from this teachable moment : 1. use scenarios, but focus on the narrative they represent. avoid numbers when uncertainty is extreme, as they can generate a cloud of possibilities that many will struggle to understand. 2. make sure everyone understands your goals. everything you do needs to have an explicit purpose and be part of a coherent framework. 3. crisis conditions argue for vigorous, even outsized, responses because maintaining confidence is critical to the recovery ; gradualism is unlikely to succeed. 4

against the unexpected makes a lot of sense. we all need to prepare for that rainy day. it rarely makes sense to take all the credit that you are offered, whether on a credit card or when you apply for a loan. many australians with mortgages find the best way of building buffers is to put any spare money into their offset account. this makes a lot of sense. my fourth and final point is to shop around and don ’ t be shy to ask for a better deal ; whether for your mortgage, your electricity contract or your phone plan. there are very good deals out there if you look. we can all play a role in making our markets more competitive by being smart and informed in our choices. again, i am pleased to be here at the launch of this important strategy. congratulations to those who have worked so hard to put it together. thank you. 2 / 2 bis central bankers'speeches