growth cannot be strengthening the resilience of our economy. nor can a high concentration of interest - only loans. i want to point out that apra ’ s measures are not targeted at high housing prices. 8 the international evidence is that these types of measures cannot sustainably address pressures on housing prices originating from the underlying supply - demand balance. but they can provide some breathing space while the underlying issues are addressed. in doing so, they can help lessen the financial amplification of the cycle that i spoke about before. reducing this 12 / 14 bis central bankers'speeches amplification while a better balance is established between supply and demand in the housing market can help with the resilience of our economy. there are some reasons to expect that a better balance between supply and demand will be established over time. one is the increased rate of home - building. as we are seeing here in brisbane and some parts of melbourne, increased supply does affect prices. this increase in supply is also affecting rents, which are increasing very slowly in most markets. a second reason is the increased investment in some cities, including in sydney, on transport. over time, this will increase the supply of well - located residential land, and this will help as well. and a third reason is that at some point, interest rates in australia will increase. to be clear, this is not a signal about the near - term outlook for interest rates in australia but rather a reminder that over time we could expect interest rates to rise, not least because of global developments. over recent years, the low interest rates in australia have helped the economy adjust to the winding down of the mining investment boom. they have helped support employment and demand through a significant adjustment in the australian economy. we should not, though, expect interest rates always to be this low. it remains to be seen how the various influences on housing prices play out. other policies, including tax and zoning policies, also have an effect. but increased supply and better transport could be expected to help address the ongoing rises in housing prices relative to incomes. these changes and some normalisation of interest rates over time might also reduce the incentive to borrow to invest in an asset whose price is rising strongly. to the extent that, over time, a better balance is established, we will be better off not incurring too much debt, and having housing prices go too high, while this is occurring. i want to make it clear that the reserve bank does not have a

philip lowe : recent economic developments and outlook opening statement by mr philip lowe, governor of the reserve bank of australia, at the house of representatives standing committee on economics, canberra, 2 december 2020. * * * we welcome the opportunity for this additional hearing of the house economics committee. a lot has happened since the previous hearing, including further significant policy measures by the rba. this morning, i would like to explain why we took these additional measures and how they will help the recovery. to provide some context, i will begin with a summary of recent economic developments and the economic outlook. economic developments and outlook this year has been an extremely difficult one for many people and businesses. but we have now turned the corner and a recovery is underway. since we last met, the economic news has, on balance, been better than we were expecting. over recent months, the number of people with a job has risen significantly and the peak in the unemployment rate is now likely to be between 7 and 8 per cent, rather than close to 10 per cent. retail spending has also continued to increase, with consumers adjusting their spending patterns to the realities of a covid - 19 world. business and consumer confidence has also lifted and housing markets have generally proved resilient. given these developments, we are now expecting gdp growth to be solidly positive in both the september and december quarters. and then, next year, our central scenario is for the economy to grow by 5 per cent and then 4 per cent over 2022. these figures, though, cannot hide the reality that the recovery will be uneven and bumpy and that it will be drawn out. some parts of the economy are doing quite well, but others are in considerable difficulty. and even with the overall economy now growing solidly, it will not be until the end of 2021 that we again reach the level of output recorded at the end of 2019. the effects of this loss of output and income are all too obvious in the labour market. the unemployment rate currently stands at 7 per cent and we are expecting it to be still above 6 per cent in two years ’ time. underemployment is higher still, with many people working on reduced hours. one consequence of higher unemployment is that wage and price pressures are likely to remain subdued. in each of the next 2 years, we are expecting annual wages growth of less than 2 per cent. and inflation, in underlying terms, is expected to be just 1 per cent next year and 1½