crisis, governments in emerging asia built up foreign exchange reserves to prevent something similar happening to them again. the counterpart to that reaction was that these countries ran large current account surpluses – they switched from being net importers of capital to net exporters. the resulting increased global saving flowed into advanced economies and put downward pressure on interest rates there. an alternative explanation of a higher desired saving rate focuses more on the advanced economies than emerging asia. according to this view, deregulation, lower inflation and other factors resulted in debt expanding relative to incomes. this lifted servicing burdens relative to incomes at any given ( nominal ) interest rate, thereby raising the saving represented by repayments of principal. another explanation for lower neutral rates is that they have been driven by increased inequality. [ 9 ] this relies on the observation that saving rates tend to be higher for high - income households, and high - income households ’ share of overall income has increased since the 1980s. this is the same period over which neutral interest rates have fallen. because global saving and investment influence the domestic neutral rate, increased inequality globally can reduce the neutral rate in australia even though income inequality has not increased by as much here. [ 10 ] these explanations for lower neutral rates are largely based on structural factors. another possibility is that cyclical influences might be persistent enough that standard models read them as affecting the neutral rate. one such influence might be the global stance of fiscal policy. its effects are hard to disentangle : expansionary fiscal policy boosts demand in the short run, but might reduce expected future growth in the long run if people focus on the need to fund current fiscal spending. that said, if fiscal policy is persistently tight, it is likely that monetary policy will have to be persistently accommodative to offset the contractionary influence on the economy. and if your model of the neutral rate does not explicitly include the global stance of fiscal policy, it will interpret this as the neutral rate having fallen. this omission might go some way to explaining a puzzle surrounding standard estimates of the neutral rate. it has fallen, but policy rates fell even more and were consistently below estimates of the neutral rate for a decade ( graph 6 ). despite this, inflation stayed low, both in australia and in other advanced economies. something must have been offsetting this apparently expansionary policy ; fiscal consolidation in the wake of the gfc, especially in europe, could have been part of that. graph 6 nominal neutral interest rate range

, a focus has been on central counterparties, which facilitate efficient and safe clearing of some types of financial transactions. these entities are increasingly important given the way global regulatory standards have been moving. the bank has focused on ensuring their risk management meets the highest standards and that they have the capacity to recover from financial shocks. we have also done a lot of work to ensure that our regulatory framework is appropriately recognised by regulators in other jurisdictions, which is important if we are to keep the australian financial system connected with the global system. with those remarks, chair, my colleagues and i await your questions. bis central bankers ’ speeches