00:00Since the start of the year, the cash rate has now been increased by 75 basis points.
00:05These increases have been necessary to tighten financial conditions and slow growth in demand in the economy to ensure we
00:12get on top of inflation.
00:14Inflation hurts all Australians because it eats away at the purchasing power of our money.
00:19Inflation in Australia was already too high before the recent conflict in the Middle East began.
00:24The most recent data have confirmed that some of the increase in inflation was being generated by economy-wide capacity
00:32pressures, including ongoing tightness in the labour market.
00:36Developments in the Middle East remain highly uncertain, but under a wide range of possible scenarios, the conflict adds to
00:43global and domestic inflation.
00:44The shock to oil and some other commodity prices has worsened the trade-off between inflation and growth.
00:51Already we've seen a sharp increase in fuel and related commodity prices, and this is already feeding through to inflation.
00:59The recent increases in interest rates will have no impact on this.
01:02What these increases do, however, is help to contain the domestic inflationary pressures after the inflation due to oil and
01:11related commodity prices eases.
01:13Now, I understand this is a really difficult time for households who are already facing higher fuel prices and other
01:19cost-of-living pressures, but we must get on top of inflation now so that it doesn't get away from
01:24us.
01:25We're already seeing that in many firms that are facing cost pressures, they're looking to increase prices of their goods
01:31and services.
01:32If left unchecked, higher costs get embedded into price and wage-setting decisions.
01:38These second-round effects could lead to even higher and persisted inflation, and if so, would require even more tightening
01:45in monetary policy to get inflation under control.
01:48We've already seen expectations for inflation over the next year or so increase, and we need to ensure that this
01:54does not lead to higher inflation expectations over the longer term.
01:59When inflation is already too high and the economy facing capacity pressures, it doesn't take much additional spending to make
02:06the job of returning inflation to target more challenging.
02:09This means spending will need to grow more slowly for a time to help restore the balance between demand and
02:15supply.
02:17The recent cash rate increases have been to address the excess demand that existed in the economy prior to the
02:23Middle East conflict.
02:24Higher fuel prices by themselves will not address this.
02:28The Board now judges the level of the cash rate to be a bit restrictive, which will help to address
02:33the risk that inflation will be higher and more persistent once the current price of shock passes through the economy.
02:40This gives the Board space to see how the conflict plays out and the response of Australian households and businesses
02:46to the shock.
02:48The Board remains committed, focused on returning inflation to target.
02:52The Board will continue to be driven by the incoming data.
02:55We will monitor the situation overseas and how it's affecting the Australian economy.
03:00We'll also continue to monitor the incoming Australian data and assess the implications for the outlook for domestic spending and
03:07inflation.
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