that we do not lose sight of the fact that the australian economy has strong fundamentals. australia is fortunate in having enviable endowments of natural resources, both in terms of minerals and agricultural land. we have a reputation as a highly reliable supplier and a producer of highquality clean food. we also have close links with the rapidly growing countries of asia. three of the four most populous countries in the world – china, india and indonesia – are in our neighbourhood. and our ties with these countries are strengthened by the many people from there who live, work and study in australia. our demographics are also reasonably favourable. our population is aging less quickly than that of many other advanced economies. the population is also growing relatively rapidly for an advanced economy – 1. 7 per cent a year, compared with 0. 6 per cent in the united states and declining populations in some countries in north asia and europe. immigration has been a strong contributor to this : almost half of us were born overseas or have at least one parent who was born overseas. while we have struggled to meet the infrastructure needs that come with this growing population, it does bring a dynamism that is not easily matched in countries with declining populations. we also have a highly talented, flexible and adaptive workforce. we have strong public institutions, a well - established macroeconomic framework, and the rule of law is respected. there is also a demonstrated record of responsible fiscal policy and low public debt. and, finally we benefit from having both a flexible exchange rate and a flexible labour market. so, our fundamentals are strong. the challenge we face is to fully capitalise on these fundamentals. if we can do this then i am confident that we can, once again, experience strong growth in real incomes in australia. monetary policy i would like to finish with some remarks about monetary policy. as you would be aware, the reserve bank board lowered the cash rate in june and july to a new low of 1 per cent. financial markets are pricing in further reductions in the cash rate over the next year. our decisions – and the expectations of investors about the future – reflect both international and domestic factors. on the international front, as i discussed earlier, interest rates around the world are low and they are moving lower. there are many reasons for this, but the central reason is that the global appetite to save is elevated relative to the global appetite to use those savings to invest in new productive capital. when lots of people want to save and

course inject vitality into the japanese economy. at the same time, it is extremely important to reform the social security systems and to work on fiscal consolidation, since public concerns over the future of the pension system and public finances hamper economic growth by putting a brake on forward - looking spending and investment. weak economic growth has made firms, individuals, and the government reluctant to take on new challenges and push ahead with painful reforms, and has made the economy heavily dependent on fiscal spending for a prolonged period. as a result, government debt has ballooned, and the combined long - term debt outstanding of the central and regional governments in japan is forecast to reach 869 trillion yen at the end of march 2011, which is about 1. 8 times japan ’ s nominal gdp. japan is thus in no position to merely sit back and observe the sovereign debt problems in europe, which i touched upon earlier, and which were triggered by concerns about fiscal sustainability. a solution must be found before japan suffers a serious loss of credibility in the markets. c. measures taken by the bank as i said earlier, the bank continues to consistently make contributions as the central bank in order to overcome deflation and return the japanese economy to a sustainable growth path with price stability. the bank ’ s efforts through the conduct of monetary policy also aim to help strengthen japan ’ s economic growth potential. the bank must always be ready to proactively implement the necessary policies to achieve its objectives. going forward, the bank should continue to be proactive and do its utmost to bring the japanese economy back to a sustainable growth path with price stability. bis central bankers ’ speeches