and most recently, we have seen a boom in investment in the resources sector. over these 20 years, we have experienced almost uninterrupted growth, a feat not matched by any other developed economy. the banking system has remained strong. the fiscal accounts have been kept in good order. and inflation has remained under control. it is fair to say that these outcomes are better than was widely expected 20 years ago. if we use our own history or overseas experience as a guide, these outcomes, collectively, could hardly be described as usual, typical or expected. indeed, they have been better than what might reasonably be described as normal. importantly, this experience leaves us with a very positive legacy. see < www. oxforddictionaries. com >. bis central bankers ’ speeches more of us have jobs than ever before. our incomes are noticeably higher. we are wealthier. and our economy has moved up the global league tables. but this experience has also affected how australians view our current economic situation. after such a good run, there is a sense of dissatisfaction in parts of the community that we are not repeating all aspects of this earlier experience. twenty years of good economic performance and rising asset prices raised our expectations of what is normal and many in the community are a little disappointed that these higher expectations are not being met fully. i suspect that this is one factor that explains why the public mood has been a bit flat over recent times, despite many observers outside our country viewing the australian economy with some envy. this change in what is considered normal is adding to the adjustments that are going on in the economy. to illustrate this change and the unusual nature of the events that preceded it, i would like to show you six graphs. the first graph is of growth in consumption per capita ( graph 1 ). if the volatility in the data is smoothed out, you can see that the period from the mid 1990s to the mid 2000s was an unusual one. consumption growth per person was consistently strong ; it was faster than over the preceding years and faster than over recent years. this is true for both retail trade and for the consumption of services. graph 1 the second graph is really a corollary of the first and is of the household saving rate ( graph 2 ). from the mid 1980s up until the mid 2000s, the saving rate was on a downward trend. put differently, growth in consumption was consistently faster than growth in income. for part of this period we spent every extra dollar we

of time discount and correspondingly an increase in the normal level of interest rates. although the high terms of trade are still boosting aggregate demand, the aftermath of the credit boom and the gradual realisation that this experience is unlikely to be repeated is see stevens g ( 2011 ), “ on the use of forecasts ”, address to australian business economists annual dinner, sydney, 24 november. see lowe p ( 2012 ), “ australia and the world ”, address to commonwealth bank australasian fixed income conference dinner, sydney, 30 october. bis central bankers ’ speeches working in the other direction. all else constant, this might be expected to lead to lower average lending rates than during the earlier period. of course, all else is not constant, including the amount of spare capacity in the economy, the nature of capital flows and the rate of productivity growth. but it is possible that normal lending rates will be somewhat lower for a period owing to the combination of global factors and the legacy of the credit boom. whether or not this turns out to be the case depends upon a whole range of factors, including how cost and price pressures in the economy evolve. this brings me to the fourth and final issue. and that is whether we are seeing a normal response of the economy to the reductions in interest rates that have occurred over the past year or so. assessments in this area are difficult, not just because there is a very wide range of historical experience, but also because of the challenge of determining what is the normal level of lending rates. however, the current response, across a large number of indicators, is falling within the range of outcomes that we have seen in the past. there do appear though, to be some differences in the behaviour of the household and the business indicators. in particular, while a number of household indicators have picked up somewhat, business confidence and conditions have not. this difference will obviously bear close watching over the period ahead. one other area where the response has been smaller than typical is the exchange rate, which has remained high. the more important conclusion, though, is that monetary policy still looks like it is working. there are lags and different parts of the economy respond differently, but lower interest rates are still effective in providing a boost to the overall economy. conclusion so to conclude, i wish you all the best of luck on your journey of discovery of what is normal ; of what is usual, typical or expected. one difficulty that i suspect we all face is when we think