. the second risk that i mentioned earlier was a boom and bust in asset prices. i do not think this is a serious risk at the moment, although it was not that long ago that it posed a threat. in 2003, we had both household borrowing and house prices growing at over 20 per cent, and that was on top of several earlier years of strong rises. if 2004 had produced another year of 20 per cent growth, then we would have had the makings of a serious boom and bust situation. as it was, 2004 was a very good year in this respect as borrowing slowed and house prices retreated for most of the year. growth in borrowing seems to have now settled for the time being at a rate of about 13 per cent per annum, and house prices may have risen in the december quarter of 2004. it is too early yet to know where either borrowing or house prices are headed. the third risk i mentioned was the balance of payments, where the current account deficit is estimated to be 6¾ per cent of gdp. this is not very different to the level reached on a number of occasions over the past two decades, but it is disappointing given that it has occurred against the background of a reasonably buoyant world economy and a strong rise in the terms of trade. strong domestic demand pushing up imports is part of the story, but the bigger part is the failure of the volume of exports to rise sufficiently to take advantage of the strong world demand. we have recently analysed this at some length, and presented our conclusions in our quarterly statement. i will be happy to talk about this later in more detail. but while the balance of payments result is disappointing, it is not of itself a reason for a monetary policy response. at this point, i usually look back at the forecasts i gave the committee last time to see how the outlook has changed. i also make a couple of new forecasts. on economic growth, last year was one of the few examples where the growth rate we now expect will be well below what we had forecast. in the middle of last year we were forecasting 3¾ per cent growth for the year to the december quarter 2004 ; now we think that when we receive the december quarter national accounts next month, they will show a growth rate of not much more than 2 per cent. how do we explain the difference? one explanation would emphasise that the national accounts are showing a picture of the economy which is considerably weaker than that shown by most other

glenn stevens : finance and the ageing population address by mr glenn stevens, deputy governor of the reserve bank of australia, at the financial planning association of australia limited, gold coast, australia, 16 november 2005. * * * there has been much talk about the phenomenon of population ageing in recent years. some of the figures, on their face, are stark. as a result of declining fertility, and rising longevity, the median age of the world's population is increasing by about three months each year. 1 in australia, whereas today there are about five people of'working age'for every person over 65 years, by mid century there will be just over two, according to abs population projections. 2 assuming all other things unchanged, that implies a substantial impact on the rate of growth of per capita national income, and on the proportion of national income required to sustain the non - working part of the population. that, in turn, would raise thorny issues of income distribution and require careful management of the policies which affect that distribution. whether such an assumption – that all other things remain unchanged – should be made is another thing altogether. indeed, if we know anything about economic behaviour at all, it is that everything else won't remain constant in the face of such profound changes in society's age structure ( forecasts of which, themselves, assume that recent fertility rates persist, even though we know that fertility rates have varied a lot, in both directions, in the past eighty years ). individuals, markets and economies will adjust to these changes. i would like to explore some of the possible adjustment issues today. much of the discussion of the ageing issue to date in australia has been about the impact on government budgets ( a lot of which seems to come via the health system, rather than solely through age - specific payments per se ). those matters are important, but surely there will be counterpart issues for private financial markets. in addressing a group of financial planners, it would seem appropriate at least to pose some of those questions, even if we cannot provide many of the answers. what is ageing and why does it occur? in popular discussion we often hear about the ageing'baby boomers '. this generation – those born between 1946 and about 1965 – is getting close to retirement. indeed, some members of the leading edge of this cohort have presumably started retirement over the past few years, and many more will be thinking about it in the next few years. there has