. compounding effects and the need to avoid an abrupt withdrawal of fiscal stimulus will mean that average public debt levels in many major economies could increase to 110 per cent of gdp before stabilizing. the composition of global savings will need to change radically. these dynamics could become self - defeating if the credibility of fiscal paths is called into question. a combination of substantial upward pressure on interest rates on investment or ricardian effects 7 on consumption would retard the recovery. it is therefore paramount that fiscal policy frameworks retain credibility. this requires both effective current initiatives and realistic exit strategies. in this regard, canada's experience of the 1990s with the steady overachievement of near - term targets on the road to fiscal balance is relevant. ultimately, a return to sustained growth in private sector demand that can accommodate desired private savings is essential. an open, global economy centred on private risk taking is the best prospect for this. but before that can be assured, much needs to be done, starting with an orderly retreat of the public sector. ricardian equivalence refers to the theory that increases in government spending are largely offset by reductions in private consumption, reflecting future anticipated tax increases. redistribution of risk between public and private sectors the financial panic required a bold response from the public sector. the loss of faith in the solvency of core banking institutions at times threatened the very functioning of the global financial system. while absolutely necessary, the response to the crisis has profoundly shifted risk from the private sector to the public sector. since october, the g - 7 has committed that no systemically important financial institutions will be allowed to fail. across the world, bank financings have been guaranteed. with securitization markets still moribund, assets have been purchased and tail risks assumed by the public sector. governments have even guaranteed warranties on certain car models. with these precedents, there will be further pressure for a host of new risk - sharing arrangements. 8 we need to think carefully about where risks are best held as we emerge from this crisis. there are two considerations. first, risks that can be priced are best borne by the private sector, whereas uncertainties that have a wide and significant potential impact are best borne by the public sector. second, risks are endogenous : public policy and private decisions influence aggregate risk in the system. for example, the widespread private use of collateral to mitigate counterparty risk reduced credit risk but sharply increased liquidity risk. similarly, the public sector's

words, while the average interest rate on deposits has indeed fallen, it has risen relative to the cash rate. the average spread above market rates on the major banks ’ advertised term deposit “ specials ” has increased by about 35 basis points over the past year ( graph 3 ). furthermore, bis central bankers ’ speeches an increase in the share of deposits written at rates higher than the rates advertised by banks has meant that the average rate on outstanding term deposits has not fallen as quickly as benchmark rates, as term deposits have been rolled over. that is, banks have been increasingly paying customers more than the rate advertised in the window if the customer asks for it, reflecting competitive pressures. moreover, there has been some shortening in the average maturity of term deposits recently given the inverted yield curve, which has meant that changes in pricing have passed through more quickly. graph 3 the average advertised rate on at - call savings deposits rose by around 20 basis points relative to the cash rate over 2011. again, in absolute terms, the interest rate declined. taking into account an increase in the proportion of savings deposits earning bonus rates, the average rate on these deposits is estimated to have increased by between 35 and 50 basis points relative to the cash rate. interest rates on transaction accounts have not fallen in line with the cash rate as many only pay very low nominal interest rates. hence, as the cash rate falls, there is no scope to lower the interest rates on these accounts. wholesale debt the absolute cost of issuing new unsecured wholesale debt fell during 2011 ( graph 4 ). relative to risk - free benchmarks, however, the cost of issuing wholesale debt has increased since mid 2011. the increase in spreads on banks ’ wholesale funding reflects global investors demanding more compensation for taking on bank credit risk, although the rise for australian banks has been less marked than it has been for other banks globally. this widening in spreads was at its peak at the beginning of the year but over recent weeks these spreads have narrowed noticeably. bis central bankers ’ speeches graph 4 there has also been an increase in the costs associated with hedging the foreign exchange risk on new foreign - currency denominated bonds. this rise in the basis swap reflected the dearth of kangaroo issuance earlier in the year at a time when the banks were raising foreign - currency debt. the pick - up in kangaroo issuance in recent weeks has alleviated some of that pressure. spreads on banks ’ new wholesale debt have come down somewhat following the ecb ’