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Lowe is then asked when he thinks inflation will return to normal:

It is a couple of years away. We haven’t yet done a full update of our forecasts following the May update. The new headline inflation forecast was done mechanically from higher oil prices and higher electricity and gas prices. In the next month or so, we will be doing a full forecast update.

It is going to be some years, I think, before inflation is back in the 2-3% range. Over the next couple of years, it will gradually come down. That is why it is important that we chart this path back there and people have confidence that we will do that.

Lowe says he hopes to curb inflation without a rise in unemployment rate

Next up, Lowe is asked whether he thinks unemployment will need to rise to get inflation back under control:

I don’t think it needs to rise but at some point it may rise. It is quite possible that inflation comes down because if the oil prices don’t keep rising, the supply side problems get resolved and we get a better balance between supply and demand in the economy.

It is a fairly narrow path we are on. We are trying to get demand and supply to increase at the same rate and achieving that is difficult.

It is quite possible at some point in time, the unemployment rate will rise but I don’t think it needs to rise. I am hoping we can get inflation back to two to three and keep the unemployment rate roughly where it is.

Returning to RBA governor Philip Lowe’s presentation this morning, and we have moved on to questions now, with a journalist asking if Lowe thought a recession was on the horizon.

Lowe said he doesn’t see a recession coming soon, noting the low rate of unemployment and that Australia has “a lot of positives”:

I don’t see a recession on the horizon here. Right at the moment, the unemployment rate is the lowest in 50 years, the participation rate is the highest ever. More working-age Australians have jobs than ever before, the number of job vacancies is at a record high. Households have strong balance sheets.

Our terms of trade – so this is the price of our export and relative import prices – are at the highest ever. When we had the resources boom a decade ago, I used to say it is the highest since 1848. We had the gold rushes in the British colonies, that was the highest since 1848, yet here we are today in 2022 having higher terms of trade. It is really boosting our national income a lot.

Australia has a lot of positives, so we don’t see a recession on the horizon, but the last two years, if it has taught us anything, you can’t rule anything out. Fundamentally, we are strong and the position of the household sector is strong and firms want to hire people at record rates.

It doesn’t feel like the precursor to a recession, and interest rates, while they have gone up, they are still low. The cash rate is still less than 1% at a time when unemployment rate is at a 50-year low.

The fundamentals are pretty positive still.

Victoria to invest $200m in mental health programs for children

The Victorian government has announced it will be expanding mental health programs for children at 1,800 government and low-fee non-government primary schools across the state.

The move comes as part of a wider push to address mental illness among young people, with the $200m funding used to scale up a pilot program operating at 100 Victorian schools under a partnership with Murdoch Children’s Research Institute and the University of Melbourne.

The Victorian government called it “the biggest single investment in student mental health in Australia’s history”, with the education minister, James Merlino, saying:

The evidence is, this makes a profound difference.

We know the earlier in life young Victorians get mental health support, the better their changes of staying happy and healthy throughout adulthood.

Reserve Bank governor, Philip Lowe, has continued addressing the American Chamber of Commerce this morning. He says Australians should prepare for higher interest rates.

Adding to his comments about doing whatever was necessary to address inflation, Lowe warned that interest rates were still “very low” for an economy facing such high inflation and low unemployment:

As we chart our way back to 2 to 3% inflation, Australians should be prepared for more interest rate increases.

We decided to make a bigger 50 basis-point adjustment on the basis of the additional information suggesting a further upward revision to an already high inflation forecast.

The board also gave consideration to the fact that the level of interest rates was still very low.

I want to emphasise though that we are not on a preset path.

How fast we increase interest rates, and how far we need to go, will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market.

Reserve Bank governor, Philip Lowe, is speaking at an American Chamber of Commerce event in Sydney, and has pledged to avoid the mistakes of the 1970’s stagflation period, saying the RBA will do “what is necessary” to ensure inflation remains low.

Lowe admitted that global events had been influencing the rising rates of inflation, but added that, increasingly, domestic factors were coming into play:

Following the strong recovery from the pandemic, growth in domestic spending is now testing the ability of the economy to meet the demand for goods and services.

This is particularly evident in the labour market, with many firms reporting that the availability of labour is a significant constraint on their ability to operate and/or expand.

High inflation damages the economy, reduces the purchasing power of people’s incomes and devalues people’s savings.

It is also regressive, hurting most those who are least well equipped to protect themselves.

Ben Butler

Australia likely to impose more sanctions on Russia, Dfat official says

More sanctions against Russian people and companies over the invasion of Ukraine are likely, a senior foreign affairs department official says.

“It wouldn’t be unsafe to bet some money on further sanctions in relation to Russia,” Andrew Walter, a first assistant secretary at Dfat, said. “Beyond that, I don’t intend to speculate.”

Speaking on Monday at a conference in Sydney organised by ACAMS, a global organisation of anti-financial crime professionals, Walter also said that the department was working to deal with complaints by banks and other financial intermediaries that the sanctions system was too complicated.

Walter said Australia’s sanctions had revealed that there was a large amount of interaction between Russia and Australia, despite the relatively shallow economic links between the two countries.

“That’s because Australians are operating all over the world and Russians are operating all over the world,” he said.

During the conference, bankers said they have had to dramatically increase their sanctions compliance divisions, and complained that the complexity of the Australian sanctions regime can make complying with it difficult.

“I can’t see work around that complexity of implementation of existing sanctions abating in the short term,” Walter said.

“I think that’s going to be a big feature and it’s very important we step back from that a little bit and grab what lessons we can, and see whether there’s appropriate reforms to address some of those kind of frictional points in there.”

The Sri Lankan navy has declared that it cannot stop a surge of boats leaving for Australia, as hundreds try to flee the country’s economic meltdown.

Speaking to the Age, Sri Lankan navy spokesman Captain Indika De Silva said the navy would struggle to cover the island’s 1,340km coastline, and that some smugglers were trying to use the new political landscape in Australia “to their advantage”:

Sometimes there have been boats that have slipped through.

It’s not because we don’t have the resources. It’s the way they operate – the smugglers – it is their primary task to evade the navy mechanisms.

So far we have been able to carry our duties at an appropriate level to counter the threats emanating from the maritime domain including those illicit migration attempts.

Opposition leader, Peter Dutton, has taken to 2GB radio this morning to declare his party would not be changing its climate policy because “millions of Australians voted for us on that basis”.

Ignoring the electoral thumping the Coalition took at the election, and the swirling discussions around whether the result should mean change for the opposition, Dutton said the party room would also consider any “new information” if presented with it:

We took our policy to the election and millions of Australians voted for us on that basis. That’s the position that we’ll take forward.

Over time, if you’ve got new information before you and a new proposition, well, that can be considered by the party room.

This, by the way, comes as a moderate Liberal MP, who has chosen to remain anonymous, told the Financial Review they would take issue with Dutton opposing Labor’s emissions legislation, particularly because of the election result:

There was some consternation that there hasn’t been a proper discussion given those who face obvious pressures in their seats on this issue.

NSW Health is reporting 7,805 new Covid cases and seven deaths: