Taking account of the accuracy statistics I have quoted above, we can characterise the RBA’s latest published outlook as suggesting that, absent large shocks to oil prices or the Australian dollar, or further extreme weather events, or the world economy taking a serious turn for the worse (say because of events in Europe), Australia’s inflation rate in 2012 has a pretty good chance of being between 2 and 3 per cent.
The chances of a similar outcome in 2013 are also reasonable, though with slightly greater probability that inflation would end up above 3 per cent in that year than seems the case for 2012. That is, the point forecast is a little higher in the second year. Even so, a margin of uncertainty is inevitable.