amando m tetangco, jr : a job well done, all things considered closing remarks by mr amando m tetangco, jr, governor of the central bank of the philippines ( bangko sentral ng pilipinas ), at the bsp ’ s mid - year organizational performance review session, manila, 23 august 2008. * * * members of the monetary board, fellow central bankers, good afternoon. during last year's planning session in baguio, we agreed to adopt the scorecard as our means of setting targets and measuring performance. this is therefore our first mid - year organizational performance review using the commitments forged last year as basis for our assessment. i trust that you find it a useful and effective gauge of where we stand relative to our mission, how our stakeholders perceive us, and how our business, learning and growth processes fared in terms of responding to our desired results. the question is how exactly did we fare, over all? well, i am sure everyone here has an answer to this question. the way i look at it, we did well, all things considered. if you recall, we set our commitments last year at a time when our economy was on its way to hitting its best gdp growth rate in 31 years and inflation eventually averaging out at 2. 8 %, the lowest annual rate in 21 years. at that time, we used the word benign to describe inflation. how fast things changed : in july 2008, inflation rate hit 12. 2 %, the highest in 17 years. as cyd described it, asia is at the epicenter of the surge in inflation. nevertheless, ours is far better than inflation rates of over 20 % in other asian countries. while we have our share of detractors, it is a fact that the bangko sentral continues to be recognized for its ability to temper inflation despite severe supply shocks. in the field of banking, we continue to reap the benefits of remaining faithful to our reform agenda. in fact, philippine banks have emerged stronger and better - capitalized, at a time when even global financial giants are crippled by severe losses from the continuing turmoil in the financial market. this is the result of political will on the part of the monetary board and the rest of the bangko sentral to ensure that our banks adhere to prudential standards. comprehensive and thorough examination reports prepared by our examiners provide solid underpinnings for our decisions and actions and they are able to produce such

decade ago that australia was being described as an “ old economy ”. now perceptions have changed, at least in a relative sense. the shift in global portfolio allocation that seems to be associated with this is potentially very important. in a more risk averse world, the supply of genuinely low - risk assets seems smaller. countries that have offered a reasonably stable economic environment and relatively sound public finances – of which australia is one – are attracting greater flows of official capital now than they did a decade ago. this has recently been adding to the upward pressure on the exchange rate, independently of the rise in the terms of trade. as is so often the case in economics, there are two sides to this. on the one hand, the additional rise in the exchange rate pushes our cost structure in the tradable sectors of the economy up relative to other countries. this is a contractionary force and adds further to the already considerable pressure for structural change. on the other hand, it amounts to a reduction in the cost of international capital for australian borrowers, particularly government borrowers. at the margin, this has to make the task of ensuring fiscal soundness a little easier. even for private borrowers the unusually low level of long - term rates for the official sector offsets a good deal of the widening in spreads due to perceptions of higher private credit risk ( that being, of course, a global phenomenon ). bis central bankers ’ speeches a greater flow of cheaper capital to a country is an advantage. it is important, of course, that it is used wisely. when risk appetite is strong, and risk assessment by lenders too loose, such conditions can result in problems. for example, it has been argued that the flow of capital to the united states looking for low - risk assets was channelled by the us financial system into structured products that had the illusion of high quality, but which ultimately resulted in the sub - prime mortgage crisis. at this point, however, we do not seem to have that problem in australia. if anything, households, businesses and governments are looking, to varying degrees, to reduce their debt. the financial sector is quite risk averse in its lending practices, particularly towards some of the business sectors that might be willing to take on additional debt. in such circumstances, the competitiveness - dampening effect of the higher exchange rate on the traded sector that results from the portfolio shifts may, for some period of time, outweigh the expansionary effect of a lower cost