Transcript of Question & Answer Session Economic Conditions in Post-Pandemic Australia with a Regional Lens

My question to you is over the past week there’s been a fair bit of volatility in global stock markets but it’s not always apparent such volatility has anything to do with what’s happening in the real economy. Does stock market volatility reflect what is happening in the real economy and does the RBA take into account stock market volatility when setting the cash rate and if so, why is that? Thank you very much again.

Thank you for the question and a very topical one at that. Volatility in markets doesn’t necessarily relate to the real economy. I’ll just explain a little bit what happened. What happened was in the United States on Friday night they got an employment number which was much less than people were expecting and they thought, ‘oh no, the US economy is going to go into recession’. Everyone had been thinking the economy is going along really nicely, and so all of a sudden everyone thought, ‘oh no, it’s going into recession’. Stock market valuations, at least partly reflect what people think is going to happen in the future with the economy. So, to the extent that people thought this doesn’t bode well for the economy, they started selling stocks. But it wasn’t quite that simple, though. At the same time, the Bank of Japan raised interest rates in Japan and there’s this thing called - it’s technically called a carry trade, but what it means is that investors borrow really cheap money in Japan – where interest rates are practically zero – and then they invest it in things with high yields, so they invest it in the United States in the stock market, which is growing up really sharply. So, when this happened, a lot of people who had borrowed lots of money cheap in Japan and spent it in the stock market thought ‘oh, I better get out, the US is turning down, Japan is raising interest rates, I’ve got to unwind all my trades.’ This is sometimes what happens. Markets can feed on themselves and they react more sharply than you would expect given something as simple as one employment number in the United States. Things have settled down since then, but I think it’s worth keeping an eye on and the reason it’s worth keeping an eye on is because if there’s a lot of volatility in financial markets it does affect sentiment, it does affect people’s incentives to invest and businesses and households. We can’t ignore it completely, but it isn’t the economy. So that’s a longish answer. I hope that was okay.

I have two questions maybe, if you can indulge. There’s been some discussion in Canberra around the government exercising its power to overturn a potential interest rate increase. My question is what do you think that might do to our reputation in global markets, and the second one is where do you think currently our fiscal policy – state and federal – is aligned with the objectives of the RBA.

On the discussion about overruling interest rates, there’s a section called section 11 in the Reserve Bank Act which does allow the government to — it’s a process they’ve got to go through, the Bank and the government can’t agree and the government can technically overrule the Bank. It’s never happened. It’s never been used. It’s very much a nuclear option. My feeling is if it did happen, I think it would have an impact on what people see as an independent central bank, but I don’t actually think we’re in any danger of that happening. Some other central banks have similar sorts of — I know the Bank of England, for example, has a similar sort of clause in its Act as well. As I say, it’s never been used and I can’t foresee it being used.

On fiscal policy, governments have a job to do and I have a job to do. My job and the Reserve Bank’s job is to get inflation down. The governments have a different job. Their job is also to get inflation down, and they acknowledge that, but it’s also to provide services and infrastructure for the Australian people. So, they need to do that at the same time as they need to focus on keeping inflation down. My personal view is that they’re doing what they can do in that area and I’m doing what I can do in that area.

I was lucky enough to go to University of New England as well, and one of the things that I learnt was something about monetary policy, but historically the American interest rates are always sort of a couple of percentage points below ours; is that right?

Well, it depends which rate you’re talking about. Their short-term rate, their policy rate is above ours, actually.

At the moment, but in the past it’s always been below by a couple of per cent, I thought.

It depends on what averages you take over time. Sometimes it’s above, sometimes it’s below.

Okay. That’s probably ruined the question.

Tell me the question anyway.

Well, I thought that was the position and I thought at the moment American interest rates are actually one and a bit per cent above ours, so I was wondering if that comes into your thought process when you’re doing your monetary policy settings, and what does it mean for the Australian dollar which is very important to rural Australia, and our interest rates?

That’s a good question and let me give you what I think is hopefully a good answer. Interest rates overseas and Australia can vary and they do vary, as you say. At the moment, interest rates in the United States are higher than us. We’ve been criticised for that, in fact. We’ve been criticised by some people saying our interest rates should be … near where the United States ones are. But we’ve chosen, as I said earlier, very deliberately to try and bring inflation down while not turning the economy into a recession and spiking unemployment. That’s been our strategy. But because we have a floating exchange rate, as you rightly say, it does mean we have the ability to set interest rates as we think they are appropriate for our economy, and that does give us room to set interest rates different from overseas. As you rightly point out, it has implications for the exchange rate. At the moment, with US interest rates higher than ours, that’s probably keeping our dollar a little bit lower. But if the interest rates in the US start to decline, which people are expecting, that will probably give a bit more support to our exchange rate. So, our interest rates won’t be so far apart. The exchange rate, it does impact particularly exporters, so as the exchange rate declines it’s good for exporters that are selling in US dollars because they get more income, and when the exchange rate appreciates, as you note, that’s more difficult for exporters, but the exchange rate does play a role in helping to keep inflation in the band as well. So, when we put up interest rates normally, if no-one else was moving interest rates, that would put a bit of upward pressure on our exchange rate, that would mean that imports would be a bit cheaper, exports would be a bit more expensive, and that would help to lower inflation. At the moment, everyone had increased their interest rates coming out of the pandemic so we didn’t really get much action from the exchange rate. But over the next while, as different countries go different ways, it is going to come back into play. So, we can set interest rates for the conditions that we want to in Australia, but we do have to be conscious that it’s going to impact the exchange rate and that’s something that we obviously don’t ignore in our monetary policy decisions.

This isn’t really a question, it’s more an observation which I’d be interested in your (inaudible). We’re having trouble getting students to do economics (inaudible) to the point where our degree may not survive much longer, which has happened at a number of universities. This really worries me because it seems to me that the problems that society faces nationally and globally are ultimately economic ones. Cost of living is an obvious case in point, but climate change is an economic problem. There’s economic causes, we need economic solutions to it. So, if economic thinking is only in the hands of the small elite at the G8 universities and the vast majority of people don’t understand economics, how can we solve those problems?

You’ve highlighted an issue that is close to our heart at the Reserve Bank. I don’t have the solutions, and there’s certainly no short-term solutions. We have a team at the Reserve Bank, one of my colleagues from that area is here today, who focus on public education. That is their focus. They spend a lot of time focusing on school students to try and get the pipeline into economics at university at least set up. Two problems with the pipeline for economics that you’ve highlighted, but I’d be even more stark, it’s typically city universities, economics at school is typically studied by boys in private schools. Public schools increasing — I went to Armidale secondary college this morning and they had a year 11 and a year 12 class in economics, 20 students all up, two were women, which highlights the other problem. There’re not many women. So, it is an issue because diversity is absolutely key to having a good economic debate. Economics isn’t black and white. It needs differences of opinion, it needs people to be debating issues, and you highlighted the environment as being one, but there’s all sorts of applications of economics in all sorts of things. It’s not all about the financial markets. So, I don’t have a solution, but we are doing our bit by trying to get around to schools to support teachers in teaching economics in schools, which hopefully will have a flow-on impact for universities, and we really need to address the diversity question that you’re talking about. So we do research in it and we’re trying to do our little bit. I don’t have a silver bullet for you, but I absolutely get where you’re coming from.

I just had a question on interest rate, cash rate. I think historically the average over 30 years is around 6 per cent, we’re obviously 4.35 down and possibly going down or maybe going up. Productivity and the technological impact, where do you see the long-term interest cash rate trending up?

The way we think about interest rates is in the context of what we might call a long-run neutral interest rate. That in theory at least is the interest rate at which it’s neither expansionary for the economy nor contractionary for the economy. The neutral interest rate is typically thought of as a real interest rate, so it’s interest rate after inflation. Now, estimates of that interest rate vary over time and it depends, it’s often a global concept because interest rates depend on effectively savings and investment. If you get lots and lots of savings and not much investment the interest rate tends to go down, natural interest rates tend to go down and you get the reverse if investment is high and savings is low.

So, having said that, where the neutral interest rate is, and where it might be going into the future is going to depend, therefore, on what we think the neutral interest rate is. It might be around about 1 per cent but who knows, real, and then if you add inflation on top of that, so, say, 2.5 per cent because that’s our target, that might give you a neutral interest rate nominally of 3.5 per cent-ish, say, neither expansionary nor contractionary. If you think going forward where interest rates are going to head in terms of their long-run level, I think that is one place to start, but then you think well what’s going to happen to investment and savings as we go forward. In the past interest rates were very low because there was big savings going on in Asia and big glut of savings and not much investment so interest rates went down. If you go out into the future you might think the energy transition there’s going to be a lot of need for investment, so that might put upward pressure on the interest rate. So, I couldn’t forecast what it’s going to be in the future. At the moment at 4.35 per cent we think we are restrictive, we think we are above the interest rate that would be neutral. But what it is going out into the future is going to depend on what happens to savings and investment and it’s also going to depend on inflation. So that’s why it’s critical we keep inflation down to around about 2.5 per cent.

Michele, a quick one from me. You’re the first Governor to have to deal with unwinding quantitative easing. When your predecessor was in this room a few years ago I asked him how he was going to do it and had he tried and he said yes he had tried and he knew how it was going to work. When the cash rate got to 0.1 you were out of bullets, you had to use quantitative easing. How is the unwinding of that happening? I notice recently you took some on your balance sheet, some of the loss. Are you prepared to take more of it on your sheet or are you going to hand it back to the Treasurer where it belongs, the debt? I’m sure in the long run you don’t want the loss on your balance sheet.

Well, there are so many questions built into that one. For those in the room quantitative easing, let me just describe what it is. When interest rates got down to 0.1, practically zero, we had nowhere else to go in terms of lowering interest rates. Some countries overseas tried negative interest rates, as in paying people to take debt, but we didn’t go there. So, instead what we did was we bought government bonds in the financial markets and the idea of that was to try and lower the yield on longer-term government bonds. What that meant was we had a very large balance sheet. We ended up with a balance sheet of about $600 billion, reflecting that and some other things. So that was quantitative easing. The idea was you actually go out and buy bonds and you try to put liquidity into the market and bring down interest rates in that way. We now have a very large government bond portfolio as a result of that and what happens when interest rates go up is that bond prices effectively are going down. So, we’ve got all these bonds on our balance sheet and the price of them is going down, so we’ve got big unrealised losses on our balance sheet. The other thing is that we are paying interest, the cash rate, we’re paying 4.35 per cent to banks that hold balances on our balance sheet and the earnings of the bonds that we’ve got, these bonds were basically earning us 1 per cent, 2 per cent. So, we’re paying interest at 4.35 per cent and we’re earning about 1, 1.5 per cent on our assets. Anyone in business knows that this is not a good look.

We do have now a very large loss on our balance sheet. It’s about $20 billion, I think, in negative equity that we have. Central banks, though, are not like other banks. They’re not like commercial banks. We create money. So, we can continue to run with that loss on our balance sheet, but what it means is that when we start to make profits again, and we will start to make profits again, we will have to use those profits to recapitalise our balance sheet. Normally what happens when we make profits is we would give a dividend to the government. It means the government is not going to get dividends for some years because we are going to use the profits that we make to recapitalise our balance sheet. I hope that sort of answers the question.

Thanks, Michele. Your predecessor had a pretty rocky ride towards the end of his tenure as Governor of the Reserve Bank and I think a lot of it went back to a statement that he made about interest rates not rising to the particular long point of time in the future. How do you sandbag your own career and learn from mistakes that probably were quite, almost insignificant at the time it was made, but it became part of his legacy?

Yes, it did and that was unfortunate because it was a thing called forward guidance and what he said was, if people had listened carefully, was that we would maintain interest rates as low as possible, because we’re in emergency settings. The pandemic was an emergency for the economy, and what he said was we won’t raise interest rates until we’re convinced we’re going to be sustainably back in the band for inflation, and on current forecasts I don’t expect that to be until 2024. He had qualifications around it, but of course people focused on 2024. Now, other countries have used these sorts of forward guidance as well. I think the challenge in Australia was that we are a predominantly variable rate mortgage society. A lot of other countries aren’t. In fact, the United States, they have 30-year fixed mortgages. So short-term interest rates don’t impact them much, but they had a very big impact here. So, people who thought he promised that interest rates wouldn’t go up until 2024 were very upset.

What am I doing? Well, you won’t hear me say that interest rates won’t go up, but I think the lesson from that was we have to be very careful — it was a conscious decision to give forward guidance. We were in emergency settings, but I think the lesson is you have to be quite careful.

It has been said that we are currently experiencing a three-speed economy in inflation where inflation in discretionary goods has already peaked and is now back to about zero, non-discretionary goods continue to flatten out or remain just outside the RBA’s target band while essential services remain high and is trending even higher. I was hoping to find out how the RBA intends to remedy the increasing inflation in essential services without negatively impacting the other two sectors.

Well, you’ve just nailed the question. We have to think about inflation globally, and I know a lot of people say, well, if you can’t impact inflation in particular areas and they’re causing the problem, then don’t affect the rest of the economy just because you can’t affect those. It’s not that easy, though. We do have to think about inflation as a total. We can’t pick out particular items and say we want inflation there to be lower, so we’ll squeeze this little bit of demand. We’ve only got one tool, which is the interest rate. What you’ve highlighted, though, I think, is that it is having an impact because we are seeing discretionary goods inflation come down. The things that we’re seeing taking longer, which you’re highlighting, are the services sorts of side of the economy, and they will start to come down, but they’re just naturally stickier than goods. Part of the reason is because labour is often a very important input into that. A lot of businesses, particularly in the services sector, are seeing wage rises and other non-labour costs, things like insurance, for example, going up. So, those sorts of things are impacting their costs and they’re passing them on to their customers. But as demand comes down, they will find it harder to pass it on to their customers. So it is, I believe, going to work. It is going to bring inflation down, but it’s just going to be slower in those components. We don’t have a luxury with one interest rate in being able to impact different sectors differently. We’ve got one blunt interest rate mechanism and that’s what we have to use. But it’s an excellent question and it’s something that certainly occupies the minds of me, my colleagues and the Board, so great question. Thank you.

Michele … whilst you’re on that with that the Board’s thinking, with the dual mandate you’re running and you’re forecasting unemployment to peak at around 4.5 per cent midway through next year, what happens if we sail through that level and inflation is still here? What’s the thinking of the Board?

If we sail through that level and inflation is still a problem, what that’s probably telling us is that there’s some structural issues in the labour market which mean that we don’t have — so there’s always some level of unemployment. Partly it is frictional, people leaving one job and moving to another, partly structural. As skills change, as the workforce changes and you need different skills there might be a mismatch between the unemployed and the skills that are needed. So, if it sails through that level and the unemployment rate sails through that level and inflation doesn’t come down, what that’s probably telling us is that there is a certain structural element of unemployment, which is there and we can’t do anything about that. So, you’re alluding to a concept which is called the NAIRU, the non-accelerating inflation rate of unemployment, and if you are above that you would typically see inflation falling, and if you’re below it you’d typically see inflation rising. So, if we sail through and inflation is still there that’s suggesting that that level of unemployment that we can maintain, while having stable inflation, is higher than we thought. Now, coming out of the pandemic, we hope that that is actually lower than it was prior to the pandemic, and that’s still what our forecasts are telling us and that’s still what we’re baking in, but again forecasts are uncertain so we have to wait and see.

I have a question from most of us students here. Apart from renewables where do you see future jobs opportunities and industry growth for future generations?

All the students are asking the really good questions, put me on the spot. Technology obviously is a very big one. I think that there’s going to be a lot of opportunities in technology, and that’s technology applied to all sorts of things. It’s not just renewables, it’s also to agriculture, it will be technology applied to our resources sector as well, these sorts of things. So, I think they’re going to be really important jobs. It’s also true that as economies become wealthier, they tend to move from goods to services, so there’s going to be lots more jobs in services areas. Where we’re seeing a lot of growth at the moment in the employment market is in fact in education and health, and as is going to happen in Australia as the population ages, there’s going to be many more jobs in those sorts of areas as well. So, I think as the structure of the economy changes this is the sorts of things you’re going to see: lots of technology sort of related jobs in a variety of fields, and I also think you’re going to see much more jobs growth in the services sector, and some of that is going to be government and some of it is going to be private.

Thanks again for coming home. I know this room is justifiably proud of you, so thank you for coming out to regional Australia. It’s good to see you again. The Bank does more than just monetary policy. Payments policy (inaudible) spoken about many sometimes. What’s the current agenda and with the benefit of hindsight of looking at issues such as scams and frauds, do you have a new view on the advent of faster payments, real-time payments et cetera?

The payments system is interesting. I spent a lot of my career in the payments system, in fact where I met David, and most of us don’t think about it until it doesn’t work, particularly now with cash use going down and a lot of people don’t carry cash anymore. I do. I quite like having cash in my wallet, but I know a lot of people who don’t carry it at all, so we are very much in the hands of the digital. What we are focusing on is resilience of payments systems at the moment because if people are relying on digital payment systems and they fall over then commerce stops. No-one can spend any money. This is sort of periodically happened in the city, and interestingly it doesn’t need to be the payment system itself. You might recall the CloudStrike incident, I don’t know if some of you heard about the CloudStrike incident which brought down a whole lot of windows PCs. Some businesses had to shut because they couldn’t even operate their tills. As technology is becoming more and more ingrained in everything we do, its resilience is posing risks to commerce. So that’s one thing that’s on our agenda.

On the fast payments issue, yes, I think fast payments are great, but I do accept that there are circumstances where, particularly with scams on the rise, that if you’ve paid away and it’s gone in a minute it’s very hard to get it back. I think the banks are taking this responsibly. What the banks are doing is trying to identify what might be high risk transactions and making sure they slow them down, introducing a bit of friction into the process there. But technology is going to help here too and the banks have lots of technology, as you know, and AI is increasingly being used here in order to identify what look like suspicious movements and transactions. So, I’m by nature a bit of an optimist, but I think it’s going to be an issue, but the banks are doing what they can. We have a world class payments system in Australia and I think it’s still worth maintaining the fast payments system and building on it.

In the last few months political debate around energy alternatives as well as the changing nature of energy prices stemming from conflict in the Middle East has caused energy prices to fluctuate rapidly. What has been the influence on energy prices on inflation and how do you expect alternative energy sources and the wider conflict in the Middle East to influence inflation in the future.

Excellent question. Nice to see a young woman studying economics. Another really good question. When we think about energy price shocks, the ones we’ve experienced and will potentially experience in the future, central banks typically try to look through those things because they influence inflation sharply, but then it washes out again, often as prices come down again or the level goes up and it stays at the same level. Inflation is a growth concept. You might get a big step up in the energy price level and it stays there, but once it stays there, its inflation is zero, in effect. Central banks try to look through those sorts of supply shocks. The challenge, I think, and you alluded to the future, the challenge is if there are more of these shocks and they build on one another then you’ve constantly got this impulse to inflation from this exogenous force that central banks can’t affect. We can’t do anything about it. Interest rates don’t affect it, it’s coming from the supply side. What can potentially happen there is if people look at the headline inflation rate, even though it’s caused by energy, and they think, therefore, that inflation is always going to be this high. This is the challenge. I hope we don’t end up in that world because it is very challenging to deal with from a central banking perspective, but it is possible and it’s particularly possible as we move into a world where we’re trying to transition to more renewable energy, and as you say obviously heightened geopolitical risks in this area as well. But in theory at least we should be able to try and look through those particular impulses and wait for them to roll out of the numbers, and what we try to focus on is what’s happening to more underlying prices instead.

You’ve mentioned a couple of times in previous speeches about productivity. We seem to be talking today very much about CPI side, but on GDP we’re in negative productivity territory, so if I’m in a business and I can only produce one widget I’ve got to charge a certain price to cover my costs. By producing five widgets, I can charge less so it’s more of a supply side issue. What can businesses do to look at the supply side, not just focus on that supply side?

We haven’t talked about productivity, but that’s actually really crucial. Productivity is about how many resources you need to produce a certain amount of goods and services. In order to grow the economy, and in order to increase our standard of living, we need to be able to use the same amount of resources to produce more. That’s what an increase in productivity is all about. At the moment productivity is not looking great. Two cautions, I suppose. One is that coming out of the pandemic, productivity numbers have been all over the place so it’s a bit difficult to read what’s happening in a trend sense, but it’s true that going into the pandemic productivity growth had slowed quite a lot and even to get back to that low level of productivity, we need that if we’re going to be able to sustain reasonable wage rises. A typical rule of thumb might be if we can get 1 per cent productivity growth and 2.5 per cent inflation then we should be able to sustain wage rises of about 3.5 per cent. If we can’t get any productivity growth then it’s very difficult to have growth in wages of around about 3.5 per cent without it adding to inflation, because of your point, it goes directly to the bottom line of the businesses. It’s really crucial, nothing I can do about it, but there’s plenty of ideas out there. We do have a Productivity Commission and things like technology and education are key to productivity. So, we’ve got to put more emphasis on that, and the Productivity Commission has lots of ideas, but it’s not all government. Businesses have got to be innovative as well and look for opportunities and the smart incubator, I think, is one example of where they’re looking for ways to increase productivity, but it’s absolutely crucial.

Thank you. Governor, in your remarks you touched on population, and in particular on migration and the government has been proposing a host of measures to reduce that overseas migration and the headline measures this week were around international students with a focus on housing prices in metropolitan areas as a key policy driver. What impact do those kinds of policy changes have on the things that interest you like productivity in the economy more broadly - I’m not asking you to editorialise obviously on government policy, but how does it feed into your thinking of what kinds of settings are most conducive to the economic outlook, economic parameters that you are mandated to pursue?

Sure. I think in the most recent rapid increase in migration I think our view is that if you just looked at what that’s done to inflation, it’s probably been net a wash. The reason I say that is because yes migrants come in and they spend, but they also add to the supply side of the economy and coming out of the pandemic, some of you may remember, labour shortages were rife. We just didn’t have people to do the jobs. So they’ve added to the supply side of the economy as well. So probably in terms of inflation, that is what we care about, it’s probably been pretty much a wash. Where it’s shown up, though, is in the capital stock and the housing stock, and that is very slow moving. The housing supply is a very slow moving thing and when you get a big increase in demand, which you do with migration, you end up obviously with pressure on housing prices and rents. Interestingly, though, that’s not the whole story. Rents and housing prices is not just a migration story. It’s also a story about a long-term decline in household size in Australia. We’ve seen household sizes decline over time for a few decades and during the pandemic it’s declined even more. People who used to perhaps have a few flatmates now think no, I want a spare room. And as the population ages, children move out, my house is one example, a big four-bedroom house and two people living in it. That adds to the demand for the stock of housing and the supply side isn’t responding quickly enough. So that does play into our inflation forecasts, but it is something that will eventually work its way through, but it takes time.

My question is very different to the questions so far. What is your advice for young students going into the industry, although I’m not going into economics, rather accounting, what is your advice, general advice, going into industry?

General advice. I probably need to preface it with a disclaimer of some description, don’t I. Look, my advice would be to — when you move into work it’s a team environment. So, my advice to anyone coming from university to the workforce is to take advantage of the team around you. You will be working with people who are more experienced, you’ll probably have some people that are like you. When I came into the workforce coming out of university, I was lucky to be surrounded by people who had a few years’ extra experience than me and senior managers who actually were very happy to share their knowledge. So, my advice would be just take it. Just move into the team environment, get working with the team, soak up as much knowledge as you possibly can, and people like to be asked questions, they like that people are curious. That would be my main bit of advice, I think, to you.

Good to be in Armidale and good to see students here showing up some of the journalists with their questions as well. At your press conference on Tuesday, you said words to the effect that you struggle to see an interest rate cut in the next six months which would take us through to at least February next year. The money markets, though, since you made those comments, are still betting on an interest rate cut by December, so my question is how strongly do you hold that conviction? I know it’s not any formal forward guidance or anything like that, but it’s your best guess at the moment, and what would it take for you to maybe change that view, such as a material increase in unemployment or a material decrease in core inflation?

The context of this is that inflation obviously is still very sticky and it’s still too high, and I made those comments with the qualification based on what we know now, and based on what the Board knows now and what the Board is forecasting we don’t see interest rates coming down quickly. This was also in the context of when I was asked earlier about the volatility in financial markets, you recall that all of a sudden people are thinking emergency rate cuts from the Fed, the Reserve Bank has to follow. I think it’s really important that we just have a very consistent approach, we don’t react to one number. This is reacting to the wealth of information that’s coming through. Is there one thing that would change my mind? No, there’s not one thing. There’s a multitude of evidence that would need to — unemployment would be one, inflation would be another, a dramatic change in circumstances overseas which really affected our trading, for example. These are all the sorts of things that I think we’d be focusing on. So, I can’t give you one thing that would change my mind, but I will say that if something does happen and it looks like we are turning down much more quickly than we thought then the Board won’t hesitate to take the right decision there either, and they will lower interest rates. It’s just that at the moment, given where inflation is, given employment is still growing quite well, given what we’re hearing from our liaison programs about still some tightness out there, we just can’t see what it is at the moment that’s going to allow us to lower interest rates. Remember we didn’t go up as far as everyone else. We’re arguably a little bit less restrictive than everyone else so we need to be a little bit careful.