Philip Lowe: Inflation targeting and economic welfare

Address by Mr Philip Lowe, Governor of the Reserve Bank of Australia, to the Anika Foundation Luncheon supported by NAB and the ABE, Sydney, 25 July 2019.

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

It is a great pleasure to address the Anika Foundation lunch for the third time.

I would like to start by winding the clock back, not by three years, but instead by 40 years. It was 40 years ago that I started studying economics in high school in Wagga Wagga. I sat the 3 unit economics exam for the Higher School Certificate (HSC) in 1979. At that time, the standard exam question was in two parts: why did Australia have both high inflation and high unemployment and what should policy do about it? I recall writing numerous essays on this troubling topic.

I also recall learning about the Misery Index. For those of you whose memories don't go back that far, this index is the sum of the unemployment rate and the inflation rate.