Michele Bullock: Monetary policy in Australia - complementarities and trade-offs

Speech by Ms Michele Bullock, Governor of the Reserve Bank of Australia, at the 2023 Commonwealth Bank Global Markets Conference, Sydney, 24 October 2023.

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

Good evening. Thank you for inviting me to speak at this event. It is my first speech as Governor, and a good opportunity to talk about a topic at the core of the Reserve Bank's responsibilities: monetary policy and the framework within which it is considered.

Before I begin, however, I would like to comment briefly on recent monetary policy. As I'm sure you are all aware, the Reserve Bank Board decided earlier this month to keep the cash rate target at 4.1 per cent, where it has been since the most recent rate rise in June. Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing.

It is possible that this can be done with the cash rate at its current level but there are risks that could see inflation return to target more slowly than currently forecast. The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. At the same time, the Board is mindful that growth in demand and the rate of inflation have been moderating, and that there are long lags in the transmission of monetary policy.

The Board will receive several pieces of information before its next meeting that will be important for this assessment. This includes a full update of the staff's forecasts. We will reconsider the outlook for the economy in light of incoming information and will have opportunities to explain our assessment in the media release and Statement on Monetary Policy that will follow the November meeting.

The focus of this speech, however, is the broader framework we use when making monetary policy decisions.