Transcript of Question & Answer Session Managing Two Transitions

Stephen Suncorp, Philip you spoke about the risk of irking the apparent reluctance of businesses to invest, not only here in Australia but globally. It's a tough question but do you see any particular catalyst or catalysts that will change that mindset?

As I said there's no kind of magic lever here. Last year you might recall that Australia chaired the G20 and much of the effort that we put in during that year was to encourage countries right around the world to identify structural reforms that would ultimately improve the business investment climate in their countries and none of these things, it's not like an on-off switch, but implementing a program of structural reform ultimately improves the business investment climate, so there was a long list of commitments that were entered into by countries around the world, but in Australia the areas where we could do things I think are pretty well known: it's competition policy, it's innovation policy, it's tax policy, it's labour market reform. None of these things in and of themselves will encourage business to go out immediately and invest but a commitment to a program of structural reform I think in the end is the best thing that we can do here.

Any other questions?

David Cotte from Sky News Business, Philip Lowe you spoke about the currency helping to support the economy, depreciating by about 20 per cent over two years, we understand it slightly rise, how at danger are we globally for seeing a currency war between the different central banks all trying to bid down their currencies because they all want to give that support to their own economies and how much does that weigh on the RBA's thinking?

I don't like the language of currency wars because I think it's not an accurate representation of what's going on. In most of the developed countries there's a deficiency of aggregate demand relative to the supply and the economy and so inflation is low and growth is weak, and central banks are responding to that. So we've got zero interest rates in much of the world and very large purchases of assets by the major central banks and they're doing that to try and stimulate their economies. Now one of the channels through which that works is a weaker exchange rate than otherwise would have been the case but the policies aren't designed to weaken their currencies they're designed to support growth in their economies and I think that's an important distinction. In Australia the monetary easing's in the rest of the world have meant our currency's been higher and we've responded to that by having lower interest rates than we otherwise would have had, so I've spoken on other occasions that the configuration that we have with the exchange rate being probably too high and interest rates that have an implication for interest rates is not the optimal configuration but it's the one we actually have and we have to deal with that. But I don't see this as kind of countries involving in policies to depreciate their currencies it's the result of the stimulatory monetary policy they feel like they have to implement given they're missing both their employment and inflation objectives.

Okay well last question thanks.

Good morning, Mark Mulligan from Fairfax. Mr Lowe you mentioned here the optimal configuration in monetary policy settings at the same time there is some concern about more indebtedness in the households. There's been some debate since the last cash rate decision about whether or not the Bank's actually sort of pulled back a little bit from its easing bias, all things considered and the content of your speech, is that a fair assessment that you have actually moved back a bit from what we might consider an easing bias?

Well you might notice that if you look back through the interest rate decisions of recent years on the months where we have changed the cash rate we haven't provided any guidance about what's likely to happen in the future and I think that's appropriate, the focus on that month is really on the decision rather than what comes in the future. So we still have scope to lower interest rates if we need to. That doesn't mean we're going to but if we have scope to do that if we need to, and nothing has changed in that dimension, but the idea kind of when we announce a reduction [in?] interest rates that we continue to provide guidance, that's something that we haven't done that in the past and we want the focus very much to be on the decision that's taken rather than prospective changes that might come down the track.