less supportive to australia than it had been some years ago. our terms of trade are falling. they have been doing so for about 3½ years. it had always been understood that this would occur, even if we were not very accurate in predicting its timing ( we predicted it way too early ) or its extent : some key resource prices initially fell a little more slowly, but more recently a good deal more quickly, than either official or private consensus forecasts had assumed. nonetheless, the actual bis central bankers ’ speeches event has been getting much attention. the various ramifications – declining mining investment, the effects on incomes and government revenues – are the subject of daily news. in some other respects, not a lot has changed lately. china continues to grow in size and importance and to open up. much was made of china “ missing ” its 2014 growth target, by one tenth of a percentage point. ( let us in australia hope our target misses are all only of that size. ) much was also made of the lower target set for 2015, but this was always going to occur, and successive growth objectives are likely to get progressively lower over the years ahead. an economy as large as china is unlikely to sustain the sorts of growth rates seen in earlier years. no one grows at 10 per cent forever. even growth a bit below this year ’ s objective would still be a considerable impetus to global demand and output. that said, the outworking of some of the excesses of the earlier period of rapid growth, especially the period just after the financial crisis of 2008, remains a work in progress and a source of risk. but in other ways, one could argue that the global backdrop has improved. as i have noted, the us economy – still the world ’ s largest and most innovative – has gained momentum over the past year, looking through the temporary ups and downs of the data. for all china ’ s great importance to australia these days, a healthy us economy should not be underestimated as a driver of business thinking and as a trend - setter for financial markets. in addition, the fall in oil prices, which is mostly the result of more oil being available than used to be the case, is mainly a bullish development for the global economy in the short term, problems for producer states notwithstanding. it is a bonus for american consumers certainly. it is expected that the federal reserve will, some time this year, lift the federal funds rate accelerator off the floor. if that

past year, the stock market, as measured by the asx 200 accumulation index, has returned about 25 per cent. 1 the median price of a dwelling in australia has risen by about 8 per cent over the past 18 months, reversing a previous decline. overall, the net worth of australians has increased by around 15 per cent, or more than $ 800 billion, since the end of 2011. it is not yet clear to what extent, or when, these more favourable trends in “ confidence ” will translate into intentions to spend, invest and employ. the pace of new dwelling construction is starting to respond to higher prices in the established property market, as we need it to. but at this stage, the available information suggests that broader investment intentions in the business community remain subdued. it may be a while yet before we can expect to see conclusive evidence of a change here. in the interim, some commentators have taken the view that the property market dynamics are worrying. my own view, thus far, has been that some rise in housing prices is part of the normal cyclical dynamic, that it improves the incentive to build, and that a price rise reversing an earlier decline probably isn ’ t something to complain about too quickly. moreover, credit growth, at between 4 and 5 per cent per annum to households, and less than that for business, does not suggest that rising leverage is so far feeding the price rise. hence it has been a little too early to signal great concern. there are, however, two caveats. the first is that, notwithstanding the above comment, credit growth may pick up somewhat over the period ahead. so this is an area to which we will, naturally, pay close attention. secondly, while overall credit growth remains low at present, borrowing is increasing quite quickly in some pockets. investor participation in housing in sydney, in particular, is becoming noticeably stronger. over the past year, the rate of finance approvals for this purpose has increased by 40 per cent. we have certainly experienced higher rates of growth of finance than that in the past, and it may be that we are seeing some catch - up from a delayed initial response to fundamentals favouring more investment in housing. nonetheless, as this activity continues, lenders and borrowers alike would be well advised to take due care. it is very important that strong lending standards remain in place, and that decisions be based on sensible assumptions this index, by the way, exceeds the 2007 peak, unlike