Some of this growth is being offset by negative effects coming through business investment and exports, particularly in manufacturing and the resource sector. On the whole, however, it appears that our economy is still operating close to capacity but probably with a modest amount of excess supply. Governing Council agreed that, all things considered, this excess supply is probably not pervasive.
Furthermore, our situation differs from many other countries in that inflation is at our 2 percent target today and projected to remain very close to target, despite the presence of modest excess supply. However, we acknowledge the downside risks, as set out in our alternative scenario in Box 3.