is distributed to shareholders or retained. while a significant proportion of the earnings distributed goes offshore, local shareholders also benefit. in fact, most of us are shareholders in the mining industry through our superannuation bis central bankers ’ speeches schemes. 2 we don ’ t get this income directly to spend now – it is in our superannuation. nonetheless, it is genuine income and a genuine increase in wealth. a good proportion of the earnings retained by companies is used to fund a further build up of physical investment, which imparts demand to construction and manufacturing. based on the industry liaison the bank has done, around half – give or take – of the demand generated by these projects is typically filled locally, though, of course, this amount varies with the nature and details of any specific project. so there are effects that spill over, even though it is not always easy to spot them. in the end the combination of the resources sector strength and all the other factors at work in the economy has, to date, produced a national rate of unemployment of around 5 per cent, and in queensland only a bit over 5 per cent. there are regional variations in unemployment rates, but at this point these look comparable to what has been seen at most times in the past 10 years – a period that has seen both lower average unemployment rates and lower variation in unemployment rates than the preceding decade. secondly, some of the undoubted differences in performance observable at present look like the inverse of earlier differences. take housing prices and population growth, which are of course quite closely related. it surely is no coincidence that the two state capitals that have had the clearest evidence of declining house prices over the past couple of years – brisbane and perth – are the two that previously had the highest rate of population growth and that have since had the biggest decline in population growth. moreover, it is hard to avoid the conclusion that changes in relative housing costs between states, while certainly not the only factor at work, have played an important role. relative costs are affected by interstate population flows, but those costs then in turn have a feed - back effect on population flows. this is particularly so for queensland. historically, queensland has had faster population growth than the southern states, as it has seen a slightly higher natural increase, a rate of net international migration on par with other states and a very substantial net positive flow of interstate migrants. net interstate migration to queensland peaked around 2003 – not long after sydney dwelling prices had reached a new high

philip lowe : some evolving questions address by mr philip lowe, governor of the reserve bank of australia, to the australian business economists annual dinner, sydney, 21 november 2017. * * * i would like to thank andrea brischetto for assistance in the preparation of this talk. it is a pleasure for me to speak at the annual dinner of the australian business economists. i have spoken at this dinner three times before : in 2010, 2012 and 2014. thank you for inviting me back. when i spoke in 2012 the title of my remarks was ‘ what is normal? ’ 1 on that occasion, i talked about a recalibration in expectations about what was considered normal in the australian economy. i also suggested that the normal level of interest rates might be lower than it was in the past. five years on, we are still searching to understand what is normal. in a number of countries, low rates of unemployment are coexisting with below - average inflation. low inflation, in turn, means low interest rates. many investors judge that this unusual combination of low unemployment and low inflation can persist for quite some time – perhaps, that it is now normal. with inflation rates having surprised on the downside for a few years now, there is unusually low compensation for future inflation risk in many financial markets. real income growth for many households has also been unusually slow in many countries. not surprisingly, these households, including many here in australia, wonder whether this slow growth in incomes is now the new normal, or whether in time it will pass. much depends upon the answer to this, including households ’ appetite and ability to spend and borrow. so we are still searching for what is normal. tonight, i would like to use this opportunity to reflect on some of the questions we have been grappling with at the rba over the year or so that i have had the privilege of being the governor. a number of these questions go to what could be considered normal these days. while i am not able to give you a full suite of answers, i hope that you find the transparency around our thinking useful. there are three sets of questions that have occupied much of our time over the past year. the first is how the final stages of the transition to lower levels of mining investment would play out. the second is the degree to which an improving labour market would translate into a pick - up in wage growth and inflation. and the third is the nature of risks stemming from high and rising levels of