Luci Ellis: Lumps, bumps and waves

Address by Ms Luci Ellis, Assistant Governor (Economic) of the Reserve Bank of Australia, to the Ai Group, Geelong, 4 October 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you to the Ai Group for the invitation to speak to you today. It's great to be in Geelong. It's been a big week for the Bank in Victoria, with the Board meeting in Melbourne on Tuesday and the Governor's speech that evening. I don't plan to repeat what he said or speak in detail about the Board's decision. Rather, I'd like to take a step back and talk about some aspects of how the Bank's economics team understand and interpret economic developments, so we can do the analysis that is an important input into the Board's decisions.

Most of our job is interpreting recent data and using that to forecast the future. We lean heavily on our intellectual frameworks in economics for thinking about how economies work. But we also need to account for an array of special factors and big-picture trends that don't sit neatly in top-down, whole-economy models, such as standard economic forecasting models. So today I'd like to talk about how we handle special factors in our understanding of the economy. I'll also give some examples of the kinds of factors that have been relevant of late.