glenn stevens : remarks to parliamentary joint committee on the australian commission for law enforcement integrity remarks by mr glenn stevens, governor of the reserve bank of australia, to the parliamentary joint committee on the australian commission for law enforcement integrity, canberra, 30 november 2012. * * * madam chair members of the committee thank you for the opportunity to attend today and for the opportunity to make a few introductory remarks. the committee posed a number of questions to the reserve bank, some in relation to the lessons from the corruption allegations against note printing australia ( npa ) and securency, and the majority in relation to the bank ’ s offshore operations. the bank responded to these questions in late may. in regard to the corruption allegations, the companies have extended their full cooperation to the legal authorities. they have also done a great deal of work to reform policies and compliance over the past several years. of course, these matters remain before the courts. a key learning point for the reserve bank from these events is the extent of possible risks that can come from operating commercial ventures which export to a range of foreign jurisdictions. this has caused the reserve bank to re - evaluate its risk appetite insofar as such entities are concerned. as for the offshore operations of the reserve bank itself, there are three of them : in london, new york and, recently, beijing. of those three, the operations in london and new york are the largest and carry the greatest risks for the bank. those risks are overwhelmingly of a financial and operational nature, since a major part of those offices ’ function is to manage the bulk of the bank ’ s foreign currency assets. the key people in those offices are australian staff well trained in the bank ’ s policies and controls for such activities. the beijing office is, at this stage, small, purely representational, and is operated out of the australian embassy there, with the various protocols and controls associated with that. the staff there, who are bound by the bank ’ s code of conduct, also received appropriate training from the department of foreign affairs and trade. the bank ’ s control environment for the london and new york offices has been configured appropriately for the risks these offices take, with detailed policies, procedures and controls. as a general observation, given the nature of the operations and the jurisdictions in which they are operating, the risks of corruption in the london and new york offices are considered generally to be inherently no more, and no less, than associated with like activities in head office. that said, risks

than a year ( ‘ medium - term unemployment ’ ), and the long - term unemployment rate – people unemployed for more than a year – were still rising even after short - term unemployment peaked. both these rates start rising around the time that unemployment overall starts rising. this is because the stock of unemployed starts to rise partly because the flow back into employment slows down. this affects people who are already unemployed. but unemployment also rises because some previously employed people lose their jobs. this is especially relevant in recessions when many workers are laid off. so of course there is a process lag : it takes more than a year before someone who previously had a job becomes long - term unemployed, just by definition. this is why long - term unemployment continues to rise even after the layoffs decline to more normal rates. you can also see this effect during the smaller increases in overall unemployment in the late 1990s and in 2001. a recovering economy, solid employment growth, but rising long - term unemployment : it would have been tempting to misinterpret this as a structural problem. indeed, many did so at the time. but that probably is not what was going on. what this shows is the effect on a stock – unemployment – when the economic decision – to hire or lay off workers – is a flow in and out of that stock. graph 3 unemployment rates * % % short - term ( < 13 weeks ) medium - term ( 13 – 52 weeks ) long - term ( > 52 weeks ) seasonally adjusted by rba sources : abs ; rba 7 of 12 on lags once unemployment starts to decline, the stock – flow lag becomes more relevant. consider that, if the flow out of unemployment back into employment declines for a period, a stock of unemployed people can build up. even if that flow returns to more normal levels in the subsequent recovery, it can take a long time for that stock to return to low levels. that is exactly what we saw after the 1990s recession. it took 15 years from the peak, before long - term unemployment finally troughed, at a bit above ½ per cent of the labour force. again, this should not be interpreted as a structural deterioration in the performance of the labour market. it just took a long time to work down that stock of unemployment. more recently, the end of the mining investment boom in 2013 induced a period of slower growth and softer labour market conditions. as a result, both medium - term and long - term unemployment