The Bank has chosen to focus on the 3-year bond yield target for a couple of reasons. It influences many borrowing rates across the economy, given that borrowing rates in Australia are variable or fixed for short horizons, compared with other countries such as the US, where the 10-year government bond rate is a more important pricing benchmark.
Secondly, the 3-year horizon is aligned with the forward guidance on the cash rate. The Board has stated that it will not increase the cash rate until actual inflation is sustainably within the target range of 2–3 per cent. Given the outlook for the labour market and the economy, the Board does not expect to increase the cash rate for at least 3 years.