is now one of our top five trading partners. in september last year, the fijian government signed three agreements with the people ’ s republic of china to expand economic and technological cooperation and offer concessional loans for infrastructure projects. anz ’ s rmb currency exchange & benefits to fiji today ’ s launch of the rmb currency exchange is therefore timely and a step in the right direction for fiji. anz bank ’ s new facility will enable trade and investment between fiji and china to be directly settled in rmb. i have been informed that in this first phase of the rollout, customers will be able to negotiate spot fx rates and forward rates for hedging purposes. i also note that over the next 6 months anz will introduce further rmb - denominated products such as trade finance instruments ( including letters of credit ) and rmb deposit accounts. we at the reserve bank are excited by this initiative for a number of reasons. first, the rmb trading platform will allow local businesses an opportunity to negotiate improved commercial terms as chinese suppliers who currently invoice in us dollars will no longer need to build in a fx margin. both fiji businesses and consumers should benefit from the removal of the extra conversion costs associated with denominating transactions in us dollars. secondly, fiji businesses can now access a wider pool of mainland suppliers as we will now have the flexibility to pay in their local currency. the third possible benefit is that chinese investors into fiji can now convert rmb directly into fiji dollars. this new initiative will also greatly assist government and statutory corporations that have rmb denominated loans to make repayments in a more straight forward and cost effective way without first converting to us dollars. finally, as you are all aware, fiji ’ s exchange rate is pegged to our five major trading partners ’ currencies. even though china is now one of the top five trading partner countries, its currency is still not part of our exchange rate basket as almost all trade with china is currently denominated in us dollars. however, with the introduction of this trading platform and likely increased trade settlement using the rmb, there is the strong possibility of the chinese currency being part of the fiji dollar basket in the not too distant future. bis central bankers ’ speeches economic update ladies and gentlemen, the reserve bank remains bullish on our economic prospects and supports the notion underpinning the 2013 national budget that the fundamentals are being laid and the best is yet to come. throughout 2012

raised include the following : what will be the extent and duration of the disruption to economic activity in the gulf coast region? how fast will rebuilding occur, how much support will be available for rebuilding from various levels of government and how will it be funded? and how quickly will the energy infrastructure be brought back on stream? the answers to these questions will also influence two important additional questions for the national economy : what will be the time path of energy prices? and what will be the effects of the rise in retail energy prices on economywide spending and inflation? unfortunately, this added uncertainty is not likely to be resolved anytime soon ; gulf coast residents - - both households and businesses - - are assessing the damage ; rebuilding plans and supporting government programs are just beginning to be put in place ; large portions of the energy infrastructure remains shut down ; and we are only starting to see the range of possible reactions to higher energy prices. economic activity and prices will be affected for some time and discerning underlying trends will be difficult. it is not obvious that this form of uncertainty has implications for monetary policy, however. pausing or slowing down a rise in policy interest rates would not itself help to reduce uncertainty because the way in which policy might affect spending or inflation is not in question. rather this is a situation in which a central bank generally is well advised to make its best forecast, to evaluate the risks around that forecast as well as it can, and to act on that forecast and associated evaluation of risks. with regard to economic activity, my best guess is that the economy retains a good deal of forward momentum and that the evolution over time of the balance between aggregate demand and potential supply may not be greatly affected by the hurricanes and further rise in retail energy prices. in particular, the factors that were supporting the growth of activity through the first two - thirds of the year are still in place : market interest rates remain relatively low and credit spreads narrow ; underlying growth of productivity - - the ultimate source of long - run gains in incomes and living standards - - appears to be appreciable ; and the rapid rise in house prices, which persisted through at least the first half of the year, has given households a reservoir of housing wealth that they can draw on to support spending. of course, several hurricane - related forces will be restraining consumer demand in the near term, including the loss of jobs and income by displaced workers ; the effect of the rise in energy prices on disposable incomes, especially through the winter heating