With an inflation target of 0%, there would be no buffer. If an economic shock occurs in such cases, you have deflation straight away. Is that so dangerous? The prices of computers have been falling for years. Surely that is good. Cheaper computers are a good thing. Deflation means that prices in the economy as a whole are falling steadily.
Throughout 2012 domestic demand had been buoyant and investment continued to pick up. As a result, our labour market is finding some traction. However we are always prone to the threat of natural disasters and Cyclone Evan showed that we must not be complacent. There also continue to be risks on the external front with the recent downward revisions in global growth.