The issue before us in the next year or two is whether the world and Australian economies can adapt to higher energy and resource prices without a significant bout of inflation.
Lower interest rates have given households more scope to make payments on  2  For further detail on the adjustment to a higher level of household indebtedness, see Bloxham P, C Kent and M Robson (2010), “Asset Prices, Credit Growth, Monetary and Other Policies: An Australian Case Study”, RBA Research Discussion Paper 2010–06.