##a liaison imported - 50 domestic % - 50 % unit labour costs non - farm, year - ended growth - 10 * r e s e r v e b a n k o f au s t r a l i a - 10 share of firms reporting above - average increases less share reporting decreases, no change or below - average increases ; average increase indexed to 0 ; smoothed with a 13 - month henderson trend. sources : abs ; rba. survey measures, including in the rba ’ s liaison program, suggest that firms are continuing to pass through some of this cost growth to prices, although softer consumer demand has made pass - through more difficult in some industries. the key takeaway here is that domestic capacity pressures, in both housing and market services, are contributing to above - target inflation. despite a gradual easing over the past 18 months, the labour market remains relatively tight, with labour availability still a constraint for some businesses and job vacancies elevated. we also continue to observe tightness across product markets, and firms report high capacity utilisation. restrictive monetary policy has been working to bring demand and supply more into balance and this has contributed to the easing in aggregate cpi inflation. it is true that inflation in some components of the cpi has eased more than others. but it is not unusual for different components of inflation to behave differently at any point in time. and at an aggregate level, there is further to go. with underlying inflation having fallen very little over the past year in quarterly terms, the board is vigilant to upside risks. that is why, as the board has said, policy will need to be sufficiently restrictive until we are confident that inflation is moving sustainably towards the target range. why is bringing inflation down so important? we know the restrictive monetary policy settings that are necessary to bring inflation down are causing hardship to some households and businesses. we are very conscious of that. in fact, we spend a lot of time trying to understand how interest rates settings are affecting households and businesses – and i will say more about that later. but inflation causes hardship too, for all australians and particularly for the more vulnerable in our community. our experience of how costly inflation can be is the reason that getting inflation back to the target range is our priority. there are two ways to come at this. the first, taking a longer view, is to remind ourselves why we have a flexible inflation targeting framework, which goes back to the experience with high inflation in the 1970s and 1980s.

##ness and stability, as it resides within a financial trajectory underpinned by the forces of shari'ah injunctions. these shari'ah injunctions interweave islamic financial transactions with genuine productive activities and prohibit involvement in illegal and unethical activities. this intrinsic principle of governance contributes towards insulating the islamic financial system from the potential risks of financial stress triggered by excessive leverage and speculative financial activities. indeed, the islamic financial system derives its strength and stability from its faculty to uphold shari'ah principles. this demands the internalization of shari'ah principles in islamic financial transactions, in its form, spirit and substance. this epitomizes the objectives of the shari'ah in promoting economic and social justice. to achieve this objective, the islamic financial regulatory and supervisory regime must always ensure shari'ah compliance. integral to this process is the success in achieving " unity in diversity " of the interpretations of shari'ah injunctions in the realm of finance. in this regard, the islamic financial services board aims to strengthen the current initiatives to achieve a greater degree of convergence and harmonization. ladies and gentlemen : a greater understanding of islamic banking and finance on the international front would contribute towards our efforts to reinforce the on - going international initiatives towards fostering greater global financial stability. in this regard, the participation of other financial supervisory and regulatory authorities, and other international standard setting organizations would facilitate this process to achieve our shared interest of preserving the soundness and stability of the islamic financial system. ladies and gentlemen : it has been said that islamic banking and finance is a " mirror of the sea " for until and unless we have the courage to explore its depth, we would never be able to uncover the treasures that reside within. islamic banking as a new sphere of finance promises vast opportunities and benefits for all. its integration into the global financial system will contribute towards achieving our shared aspirations for financial stability to ensure balanced growth in the global economy.