However, with the persistence of low inflation as activity recovered, we also need to consider broader supply-side factors, such as the changing pattern of production across the world and the impact of digital technology. We need to consider how these global factors and also domestic developments might be affecting the shape of the New Zealand economy and the pricing behaviour of individuals and firms.
I will first talk about some of the key global supply-side trends that have contributed to low inflation internationally. I will then discuss how the domestic inflation process may be changing and how the Phillips curve may be flattening (more on that later). Finally I will discuss the policy implications of these developments and some of the associated risks.