to noticeably slower growth in our average incomes than we have become used to. in some ways, this adjustment has already started and it is proving difficult. on the more positive side, there is no shortage of things that could be done to lift our performance. the challenge is that most of these ideas require difficult political trade - offs. a related challenge is how best to capitalise on the opportunity that the economic development of the asian region provides. we have benefited from the surge in commodity prices driven by the rapid industrialisation of china, and from the increased demand for our food products, tourism, education and other services as incomes in asia have grown. but it is a competitive world out there, and other countries see these opportunities too. so we need to find ways of building upon our strengths to bring goods and services to growing asian markets at competitive prices. lifting our productivity is a good place to start. a third issue is the task of providing adequate high - quality infrastructure to help our citizens be as productive as they can and enjoy a high quality of life. as i said earlier, our population is growing strongly which is a source of dynamism for our economy. but this growth can put strains on our infrastructure, including on transport infrastructure. these strains can reduce public support for a growing population. they can also impair our ability to compete and to be as productive as we can be. good transport infrastructure, for example, opens up opportunities for people and opens markets. it also improves communities. investment in transportation infrastructure can also play an important role in addressing housing affordability, which is an increasingly important issue. infrastructure investment does of course need to be paid for. the positive news here is that there is no shortage of finance for the right projects. the task we face then is to identify the best possible projects, harness the planning capacity of government, design the best deal structures to attract private finance where it makes sense to do so, make sure that the construction process is as efficient as possible and price use appropriately. these are challenging things to do, but they are not beyond our capabilities. 2 / 4 bis central bankers'speeches the final issue that i will mention this evening is that of ensuring that our public finances are on the right track. australia has a good historical record here. net government debt, as a share of gdp, is still low, although it is higher than it used to be. our good record has provided us with a form of insurance. it meant that when difficult times did

advancement of research in this area. it presents an opportunity to rethink, and examine with scepticism, some of the assumptions found in theoretical models. one example that comes to mind is modelling how economic agents form expectations, or the degree of sophistication with which the financial system can be integrated into macro models. there is another quite interesting question from the empirical side. how can the available data in the area of the financial world be better used to identify systemic risks – or do they need to be supplemented by certain additional data? some of the papers presented at this conference have found very promising approaches. answers to these and similar questions will amplify the meaningfulness and practical relevance of future research findings. this is of great interest to central banks, not least because we use the knowledge gained from research as an input in our monetary policy decisions. allow me to discuss two relevant cases in which current events have stimulated research. 2. 1 segmentation in the money market one concerns the question of how central banks can most effectively supply the financial system with liquidity. after the us investment bank lehman brothers had filed for insolvency, the ability of whole financial market segments to function was severely constrained, requiring central banks around the world to inject a massive volume of liquidity into the money markets. against this background, a deutsche bundesbank study 1 identified segmentation in the german money market. for the behaviour of german banks in the money market, the study finds signs that the size of a bank has a systematic effect on the price of liquidity. taking a number of other factors into account, larger banks end up paying less for liquidity than see f. fecht, k. nyborg, j. rocholl ( 2008 ) : the price of liquidity : bank characteristics and market conditions, deutsche bundesbank discussion paper, series 1, no 30 / 2008. smaller banks. this effect is even more pronounced when there is an increase in the imbalance of the liquidity positions. thanks to its very broad range of counterparties, the eurosystem was able to ensure that all banks active in the euro area, whether large or small, were given equal access to the ample supply of central bank liquidity from the beginning of the financial crisis onwards. in addition, over a year ago the eurosystem had already expanded the range of maturities of its refinancing operations and now provides liquidity in the form of a fixed - rate tender