While the Reserve Bank's decisions reminded people of what is going on, Australians were already adjusting their spending to the reality of a combination of subdued wages growth, the fall in housing prices and high debt levels. Consumer confidence and monetary policy were both responding to this reality.
Improvements in productivity and labour utilisation growth which help increase the euro area’s potential growth have also implications for the conduct of monetary policy: for they can help raise the “speed limit” of the euro area economy, meaning that the economy can attain a faster rate of sustainable growth that is compatible with price stability. This leads me to a discussion of price developments.