Rather, we are doing so because delivering low and stable inflation is the most effective way for Australia's central bank to promote our collective welfare. So where does the labour market fit into all this? The answer is that it is central to all three objectives. The connection with the second objective – full employment – is obvious.
The RBA is seeking to achieve the lowest rate of unemployment that can be sustained without inflation becoming an issue. In doing this, one of the questions we face is what constitutes full employment in a modern economy where work arrangements are much more flexible than they were in the past. I will return to this issue in a moment.