I interpret the RBA’s statutory objectives, as clarified in the recent Review, as quickly getting underlying inflation down to 2.5%, the mid-point of the inflation target, while keeping unemployment near 4.5%, the estimate of the NAIRU.

I think these are sensible objectives, and even if that were in doubt, the RBA should aim for them.

I recognize that some opponents of higher rates prefer different objectives, such as a higher inflation target. We’ve just been through a lengthy debate over the framework and those views were rejected.

Other opponents of higher rates have a different interpretation of the RBA’s statutory objectives. In particular, they interpret “full employment” as meaning an unemployment rate below 4.5%. That would be fine if they were talking about industrial relations or labour market policy. But monetary policy needs to take current labour market policy as given. If monetary policy were to target an unemployment rate below estimates of the NAIRU then inflation would probably accelerate, causing more unemployment in future. The forthcoming Statement on the Conduct of Monetary Policy needs to clearly specify that “full employment” as far as the RBA is concerned, is maximum sustainable employment or the NAIRU.

Other opponents of higher rates think that recent increases in nominal rates are enough to quickly get back to 2.5%. That is not what the RBA forecasts show. More optimistic forecasts seem to assume that past empirical regularities will no longer hold. I have not seen a decent argument for that assumption.