I want to turn now to outline something of how we think about the exchange rate in setting monetary policy. In setting the Official Cash Rate, we are always very conscious of exchange rate changes, and how those developments will affect the outlook for growth and inflation a little down the track. Those effects have changed through time.
For example, not just in New Zealand but internationally, prices seem to be less responsive to exchange rate movements than they were 15 years ago. Suppliers seem to be absorbing more of the impact of cyclical fluctuations in the exchange rate.