We can either let any further anticipated direct inflation consequences of the shock come through, or try to offset them with tighter policy than otherwise. The PTA does not explicitly address long-lasting shocks, but as noted before, it does provide sufficient guidance and scope for the Reserve Bank to take a sensibly flexible approach.
Thus, in the long run, factors such as population growth, education and training, labor force participation rates, and labor market institutions determine the level and composition of aggregate employment. In contrast, trade appears to have essentially no role in determining a country’s long-run employment potential.