Get used to low underlying inflation

Our success in forecasting ahead of everyone else that the Reserve Bank of Australia would cut interest rates below 2% is mainly because we realised that the legacy of a prolonged period of below potential growth would drag down underlying inflation. That same analysis shows that underlying inflation will remain below 2% for a while yet. That means once interest rates fall to 1.5%, they will either fall further or stay at 1.5% for a very long time.