Kartik Misra: Mr Stephens, with a two-speed economy and the likelihood of a bout of Dutch disease, isn't monetary policy too blunt a tool to manage the Australian economy? So shouldn't the RBA just keep the rates neutral and let supply-side policy do the work?
Mr Stevens: Well, there are multiple speeds in the economy. That is actually always true. It is probably a bit more true now than on average. In the end, though, it is the central bank's job to try to preserve the value of money and promote financial stability. Supply-side policies can certainly help that or hinder it, depending on how they are operated, but we have to take supply-side policies as given and do our job of containing inflation pressure while taking account of the impact on the real economy [CJ: All clear to this point]. As I said earlier, right now the unemployment rate is around five, where it has been for a while; the inflation rate is a bit troubling but not out of control. I think from that overall point of view we are travelling okay [CJ: I find this next sentence a little worrying. Stevens is now giving the impression that the RBA does target both employment and inflation, which in other passages he has clearly stated is not the case.]
