##banki, with kaupþing bank ltd. the new bank will be the largest commercial bank in iceland and one of the 10 largest in the nordic countries. the privatisation of the credit institutions has thus already created ample opportunities for rationalisation and will continue to do so in the period ahead. the reform of the financial legislation and its framework in line with that in other european states has facilitated the export of financial services by icelandic financial institutions and the establishment of operations abroad. you will hear more about this process from the next speaker, director sigurdur einarsson. foreign direct investment regulations are now liberal with the most important exception that such investment is not permitted in the fishing sector. foreign direct investment is most noticeable in power intensive industries, such as the production of aluminium, which is based on iceland ’ s abundance of renewable energy resources. recent changes in corporate taxation in iceland, lowering them to among the lowest to be found, serve to attract foreign business to iceland and encourage icelandic companies with international operations to favour iceland as the base of their operations. director garðar ingvarsson will probably give you more detail on this later this afternoon. direct investment by icelandic companies abroad has risen rapidly in recent years and in a variety of areas, such as fisheries and fish processing, pharmaceuticals, retail commerce and as mentioned earlier, financial services. these developments also benefit the icelandic economy in the long run as they integrate iceland further into the global economy, allow iceland to draw more easily on the experience of others and bring in dividends. during the 20th century, iceland tried almost every type of exchange rate policy, from a monetary union with denmark to a managed float. there were long periods when the icelandic krona was pegged against or managed with respect to the currency of some trading partner countries or a basket of currencies, with varying degree of adjustability and commitment. during the 1980´s the exchange rate regime had been relatively flexible. but in the first half of the 1990´s it became much more stable, after the krona was fixed in december 1989. exchange rate stability during this period was one of the cornerstones of the successful disinflation policy that took inflation in iceland down from double digits in the late 1980s to below 2 per cent around the middle of the 1990s. once the liberalisation of financial markets was more or less completed in the mid 1990´s, exchange rate flexibility was gradually increased. the margins around the exchange rate target were widened from 2¼ per cent in either

per cent in 2022. it is certainly possible that the economy will do better than our central scenario. this scenario does not envisage a vaccine being widely available to most australians until late next year at the earliest. it also assumes that significant restrictions on international travel are still in place at the end of 2021. recent medical breakthroughs give us some hope that things will work out better than this. if so, confidence would lift and there would be a further easing of restrictions. the result would be an upside surprise to growth and jobs, especially given the significant policy stimulus that is already in place, the generally strong balance sheets and the substantial government incentives for businesses to employ people and invest. but it is also possible that things could go the other way. europe provides a salutary reminder of this. it was just 3 months ago that many commentators were remarking on the robust bounceback in europe. now, the european economy is expected to contract again in the december 1 / 4 bis central bankers'speeches quarter as countries struggle to contain the virus. similarly, in the united states the outlook is clouded by the sharp increase in case numbers there. fortunately, here in australia, we look to be on a different path, but there is no guarantee that we will remain so. this inevitably means that there is still a high degree of uncertainty about the outlook. what has become clearer, though, as time has passed is that australia is likely to experience a run of years with unemployment too high and wage increases and inflation too low, leaving us short of our goals. in the current environment, addressing the high rate of unemployment is a priority for the reserve bank board. we are intent on doing what we can, with the tools that we have, to help here. this brings me to our recent monetary policy decisions. recent monetary policy measures since the previous hearing in august, significant policy announcements were made following the board ’ s meetings in september, october and november. we made no further changes at our meeting yesterday. in september, the board increased the size of the term funding facility and allowed authorised deposit - taking institutions ( adis ) more time to draw on this facility. institutions can now access funds up to the equivalent of 5 per cent of their total loans, with additional funds available if an adi increases its lending to businesses, especially small and medium - sized businesses. in october, we changed the nature of our forward guidance about the cash rate. the focus is now on actual outcomes for inflation and unemployment