Sarah Hunter: Why productivity matters for central bankers

Speech by Ms Sarah Hunter, Assistant Governor (Economic) of the Reserve Bank of Australia, at the Citi Australia & New Zealand Investment Conference 2025, Sydney, 15 October 2025.

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

Before I begin, I would like to acknowledge the Gadigal people, the Traditional Custodians of the land on which we are meeting today. We are very lucky in Australia that our First Nations people protect our land and culture to hand down to future generations, and I would like to pay my respects to Elders past and present and to any First Nations people here with us today.

There has been lot of discussion about productivity growth over recent months, that it has slowed, and how we as a country can reverse this. This is an extremely important issue, given the fundamental role that productivity growth has as a driver of rising living standards for Australians.

While these discussions are critical for the country and are very important to me as a private individual, as a central banker my focus has to be on the implications of slower productivity growth for the economic outlook and monetary policy settings.

To achieve our mandate – that is, sustaining low and stable inflation and a labour market at full employment – we need to understand what the economy will likely look like when we're at this point. Some features are easy to identify. For instance, we would need to see inflation holding around the middle of our 2–3 per cent target band. But other features are not as obvious. Specifically, what trend pace of GDP growth would be consistent with sustaining inflation and an economy at full employment?