Our macroeconomic adjustment to the pandemic was greatly aided by low inflation and a strong terms of trade, which helped create the policy space to cut rates and provide fiscal support. Now, as the domestic recovery continues and global conditions suggest further easing of commodity prices, our external balances have begun to adjust back to deficits.
This will bring into sharper focus the financing needs of the economy and the currency, both as a facilitator of economic adjustment and as a source of inflation risk.6  These changing global conditions impact on how we conduct monetary policy. From being in a position to cut rates deeply to support recovery, we are now in a very different environment.