4  BIS central bankers’ speeches  This depreciation of the Australian dollar since April is a welcome development, and a further depreciation would be helpful in rebalancing growth in the economy. Ultimately, floating exchange rates adjust to the relative returns on capital across countries.
Since 2012, inflation has tended to change relatively little as the unemployment rate has fallen considerably, from 8.2 percent to 4.4 percent.8 In short, the Phillips curve appears to be flatter today than it was previously.9 This is also apparent in a number of advanced foreign economies, where declines in their unemployment rates to relatively low levels have failed to generate significant upward pressures on inflation.10 Given the flatness of the Phillips curve, it could take a considerable undershooting of the natural rate of unemployment to achieve our inflation objective if we were to rely on resource utilization alone.