output or both. you do not need me to tell you, therefore, that the price data to be released over the next couple of weeks will be important in evaluating the outlook and the balance of risks facing policy. before i leave the current state of the economy, a remark about the differences in performance by region is appropriate. as everyone is aware, spending growth is strongest in western australia, as resource producers seek to put in place more capacity and the income gains from the boom are partly spent. but the differences in spending overstate the differences in actual economic performance between the regions. not all the demand generated in western australia is being supplied from there : some of it is being supplied from the rest of the country, and some of it from outside australia. it is partly for that reason, presumably, that the differences in employment growth and unemployment trends across states are much smaller than the differences in spending. in fact, the extent of the differences in output growth across states, while noticeable, do not appear at present to be unusually large. they also appear to be well within the sorts of differences experienced over time by other comparable countries or regions, like the united states, canada or the euro area. at the same time, there is some tendency for labour and capital to move to the resource - intensive areas. that is exactly what is supposed to happen in a flexible economy when relative prices change : labour and capital respond to incentives. moreover, as the secretary to the treasury pointed out a couple of months ago, 6 if the current set of relative prices persists, there will be more such adjustment in the years ahead. the longer term before concluding, it would be useful to lift our eyes from the immediate ebb and flow of the short - run data and to ask, taking a medium - term view, what will be the most important task for monetary policy over the period ahead? it should be obvious that, over the next little while, the main job is to ensure that the inflationary pressure we have been experiencing of late is successfully resisted, and that expectations of future inflation remain well anchored. that will be a key part of maintaining an average inflation performance of ‘ two point something ’. we could hardly overstate the importance of maintaining that general environment where, as famously characterised by alan greenspan, inflation is sufficiently low and stable that it does not materially affect economic decisions by firms and individuals. a stable overall price environment assists in resource allocation and preserves the value of savings. it also provides monetary

thomas jordan : monetary policy in a climate of increased uncertainty summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at the snb money market event, geneva, 1 november 2007. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * uncertainty about the extent and distribution of losses from us “ subprime ” mortgages has resulted in a marked squeeze on financial markets. in particular, there is considerable uncertainty concerning the true valuation of securitised assets and structured products based on subprime mortgages. demand for liquidity has surged. in certain instances, the crisis of confidence among financial market participants was so pronounced that some markets did not function at all. the “ re - pricing of risk ” has caused risk premia for most financial instruments to soar. risk premia are important for the swiss national bank ( snb ) for two reasons. on the one hand, they act as economic signals and should therefore be as unbiased as possible in the way they reflect underlying risks. in addition, there are certain risks attached to extreme values of risk premia. abrupt and uncontrolled corrections could lead to instability on financial markets and interfere with their smooth functioning. on the other hand, risk premia affect the restrictiveness of monetary policy. an increase in such premia tightens monetary policy. the snb monetary policy concept, where the three - month libor is at the centre of the implementation of monetary policy, takes systematic account of changes in risk premia.