Philip Lowe: The labour market and monetary policy

Speech by Mr Philip Lowe, Governor of the Reserve Bank of Australia, at the Economic Society of Australia (QLD), online, 8 July 2021.

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

I would like to thank the Economic Society of Queensland for the invitation to speak today. I was looking forward to my first trip to Brisbane in 18 months, but given the current lockdowns that will have to wait for another day.

When I spoke at this lunch 2 years ago, I talked about the accumulation of evidence that Australia could sustain an unemployment rate below 5 per cent without inflation becoming a problem. I also raised the possibility that the Reserve Bank would soon cut the cash rate to help secure both lower unemployment and inflation consistent with the target.

Since then, a lot has happened: a global pandemic and the biggest peacetime economic contraction in our lifetimes; and not only did the RBA cut the cash rate, but we cut it as far as we reasonably could and the RBA's balance sheet has nearly tripled to over $500 billion. So a lot has changed since we last met.