activity. residential property sales have declined sharply over the past year, and housing starts have also fallen to be lower than they have been for over a decade. property developers are in stress and many are finding it difficult to finance the construction of apartments they have committed to. the government is encouraging banks to lend and is providing some direct support but, at the same time, it has been encouraging developers to reduce their indebtedness. this weakness in the property sector has implications for steel demand and hence demand for our iron ore. the second area of substantial uncertainty is what the current high inflation and cost - of - living pressures might do to price and wage expectations in australia. every day in the news we hear about how price rises are hurting households. first it was rises in the prices of goods during the pandemic as supply chains couldn ’ t cope with the surge in demand. but increasingly price rises in non - discretionary goods are impacting household budgets. petrol, then groceries, now rent and electricity. the floods have resulted in volatility in fresh food prices. furthermore, high fuel and shipping costs are finding their way into prices as businesses pass on increases in their input costs. how households and businesses respond to these pressures is going to be critical for the australian economy and the path of monetary policy. households recognise that their real wages are declining. and with the labour market as tight as it is, it is quite possible that workers will demand and may get wage rises. businesses might well be willing to pay higher wages if they think they can easily pass on the cost increase in higher prices. how this inflation psychology plays out is critical for the inflation outlook and for monetary policy. if this mindset were to take hold inflation will remain high. a third uncertainty is the behaviour of households as interest rates and inflation rise. although household debt hasn ’ t risen much over the past decade relative to income, it is still high so rising interest rates could make servicing debt much harder. on the other hand, one of the legacies of the pandemic was a large build - up in household savings buffers. with fiscal support for incomes during the pandemic, low interest rates increased the cash flow of households with mortgages and at times limited opportunities to spend and savings increased markedly over the past couple of years. we estimate that households overall accumulated more than $ 250 billion in additional savings during the pandemic. most of this saving has been among households at the upper end of the income distribution

rather than a term rate, and doesn't incorporate a significant bank credit risk premium. conclusion there are three main points i would like you to take away with you concerning interest rate benchmarks. first, the longevity of libor cannot be assumed, and you should start considering might mean for any contracts you have that reference libor. today what that second, in contrast, we are well advanced in changes to enhance the longevity of bbsw. while these changes entail some costs, the cost of not doing so would be considerably larger. third, you should think hard whether risk - free benchmarks are more appropriate rates for your financial contracts than credit - based benchmarks such as libor and bbsw. endnotes [ * ] thanks to ellis connolly for his work on interest rate benchmarks and in preparing this speech. i have talked about this issue previously : < https : / / www. rba. gov. au / speeches / 2016 / sp - ag - 2016 - 02 - 22. html > and < https : / / www. rba. gov. au / speeches / 2015 / sp - ag - 2015 - 11 - 18. html >. for andrew bailey's speech, see : < https : / / www. fca. org. uk / news / speeches / the - future - of - libor >. these are typically negotiable certificates of deposit ( ncds ). see : < https : / / treasury. gov. au / consultation / c2017 - t188618 / > and < http : / / www. aph. gov. au / parliamentary _ business / bills _ legislation / bills _ search _ results / result? bid = r5962 >. see : < http : / / www. asic. gov. au / about - asic / media - centre / find - a - media - release / 2017 - releases / 17 - 237mr - asic - consultson - proposed - financial - benchmark - regulatory - regime / >. for more details about the methodology for the cash rate, see : < https : / / www. rba. gov. au / mktoperations / resources / cash - rate - methodology / >. the rba has also conducted a self - assessment against the iosco benchmark principles : < https : / / www. rba. gov. au / mkt - operations / resources / cash - ratemethodo