AU RBA Gov Lowe Speaks

I would like to begin by thanking you all for your support of the Anika Foundation. Your generosity is critical to the success of the Foundation’s work helping young Australians. Thank you, in particular, to the National Australia Bank for the sponsorship of this event over recent years – your support is greatly appreciated and is making a difference. This is the seventh and final time that I have had the honour of addressing the annual lunch of the Anika Foundation. My 43 years at the RBA, and my seven years as Governor, finish next week – hence, the title of my talk today, ‘Some Closing Remarks’. The government announced my appointment as Governor on 5 May 2016. It turned out to be the most challenging day of my life – not because of the trepidation I felt about taking on the job, but because of a medical emergency. I was in Ottawa, Canada, at the time. I had just spoken at a conference organised by the Bank of Canada and had been congratulated on my appointment. As I left the stage, I felt very tired from what I thought was overwhelming jet lag. But the next thing I recall was that I was in a room with bright lights wearing just a flimsy gown. As I was trying to make sense of where I was, I thought about something I had previously read on the internet: that there was a secret society of central bank governors and that it had some strange initiation practices. I recall thinking maybe it is true here in Canada! But I was wrong – I can assure Michele there is no such society or initiation ceremony. Instead, the Canadians were into world-class health care. Unbeknown to me, the carotid artery in my neck had split, probably because of the way I had slept on the plane. This had led to a blood clot with potentially fatal consequences. But the fast action of the Bank of Canada staff and the excellent care at Ottawa Hospital got on top of this situation. Seven years later, I am finishing my term fit and healthy. RBA'S LOWE: INFLATION IS LIKELY TO BE MORE VARIABLE AROUND TARGET #News #Markets #RBA #INFLATION #live RBA’s Lowe: My Recent Focus is Risk Wages, Profits Run Ahead of Rates Consistent with Return to Inflation Target RBA’s Lowe: If This Risk Materialised and Inflation Became Sticky, Would Require Tighter MonPol

*RBA’s Lowe: Hasn’t Been Any Shift in RBA’s Inflation Tolerance RBA’s Lowe: What Has Changed in Recent Months is Our Assessment of Risks *RBA’s Lowe: RBA’s Patience Has Limit, Inflation Tested That Limit *RBA’s Lowe: Strong Correlation Between Inflation Abroad and Australia

Thank you very much for the invitation to join Morgan Stanley’s Australian Summit. It is a pleasure to be able to join you. This morning, I would like to discuss the narrow path the Reserve Bank Board is seeking to navigate. That path is one where inflation returns to target within a reasonable timeframe, while the economy continues to grow and we hold on to as many of the gains in the labour market as we can. It is still possible to navigate this path and our ambition is to do so. But it is a narrow path and likely to be a bumpy one, with risks on both sides. Today, I would like to talk about the importance of the destination – that is, a sustainable return of inflation to target – and our strategy for getting there, including the decision yesterday to increase the cash rate again. I will then turn to some of the factors that the Board is considering as it navigates the path back to 2–3 per cent inflation. The return of inflation to target Recent inflation readings have been the highest for more than 30 years (Graph 1). The reasons for this are well known. They include supply-side disruptions caused by the pandemic, Russia’s invasion of Ukraine, and the large fiscal and monetary policy resp *RBA’s Lowe: RBA on Alert to Risk Inflation Stays Too High, Too Long *RBA’s Lowe: Remain on Path to Soft Landing, but Significant Risks *RBA’s Lowe: Hikes Aim to Bring CPI Back to Target in Reasonable Time *RBA’s Lowe: Risks to Sustainable Wage Growth From Weak Productivity RBA’s Lowe: Path Back to 2–3% Inflation is Likely to Involve a Couple of Years of Relatively Slow Growth RBA’s Lowe: Desire to Preserve Job Market Gains Does Not Mean Board Will Tolerate Higher Inflation Persisting RBA’s Lowe: Too Early to Declare Victory in the Battle Against Inflation RBA’s Lowe: June Rate Rise Followed Information Suggesting Greater Upside Risks to Bank’s Inflation Outlook RBA’s Lowe: April CPI Reading Has Not Changed Assessment Inflation is Trending Lower

RBA'S GOV. LOWE: NOMINAL WAGE INCREASE IS NOT A PROBLEM, BUT PRODUCTIVITY IS. *RBA’s Lowe: Very Much in Data-Dependent Mode on Interest Rates *RBA’s Lowe: Monetary Policy in Restrictive Territory RBA’s Lowe: Not a Single Variable That Drives Our Decisions RBA'S GOV. LOWE: THE CENTRAL BANK CANNOT AFFORD TO ALLOW INFLATION TO CONTINUE OVER TARGET BEYOND MID-2025.