The challenge we face is how best to accommodate these changes, and to capture the considerable benefits that they can bring, while minimizing the costs that can arise when the structure of the economy is changing. This is no easy task. But it is surely a better challenge to face than those confronting most other advanced economies.
The most important contribution the Reserve Bank can make to this task is to keep inflation low and stable, so that firms can respond to the shift in relative prices without their decisions being distorted by concerns about inflation in the general level of prices. The inflation targeting regime that we have had for nearly two decades provides the right framework to do this.