The rewards for macroeconomic discipline, however, build up over time and it is important to recognise where we are now beginning to see the real benefits come through. On the fiscal side, the National Treasury’s commitment to maintaining budgetary control and strengthening the public finances is now providing the base for significantly increased expenditure on key public services without in anyway jeopardising fiscal discipline.
We’ve already seen a momentum shift in goods prices. For inflation to get back to 2%, supply needs to catch up with demand and services price inflation needs to cool. Wage growth will need to moderate alongside inflation expectations, and pricing behaviour normalize. If those things don’t happen, inflation won’t come back to our 2% target, and additional monetary tightening will be required.