Contents

Overview 1

1. Financial Conditions 6

1.1 Interest rate markets 8

1.2 Corporate funding markets 11

1.3 Foreign exchange markets 13

1.4 Australian banks and credit markets 14

2. Economic Conditions 18

2.1 Commodity price developments related to the Middle East conflict 20

2.2 Global economic conditions 22

2.3 Domestic economic activity 25

2.4 Labour market and wages 30

2.5 Potential supply 33

2.6 Assessment of spare capacity 34

2.7 Inflation 37

Box A: Insights From Liaison 42

3. Outlook 45

3.1 Key judgements in the forecast 47

3.2 The global outlook 49

3.3 The domestic outlook 51

3.4 Key risks to the outlook 57

3.5 Detailed forecast information 59