euro area followed the us economy into another period of weakness during the second half of 2002. japan, too, has been unable to chart an independent growth path based on domestic demand. such growth as it experienced in 2002 was export driven. that gave way to a renewed period of contraction towards the end of the year. so across several fronts, the international environment, having looked as though it was improving noticeably early last year, turned out to be quite disappointing. the exception to this picture was in parts of asia, particularly china, where growth has remained very strong in the past year. china is becoming a very significant source of supply for internationally traded manufactures, but also a source of demand for raw materials and various high - value services. these trends are already having quite noticeable effects on trade patterns, and will continue to do so for many years. australia is as well placed as any country to benefit from this. international issues for 2003 the consensus of private forecasters calls for growth in the us economy of about 2. 7 per cent in 2003. this is a forecast which envisages the'soft spot'in late 2002 giving way to better growth in the early part of 2003. this helps to drive a forecast for world growth of about 3½ per cent, which is about the average growth over the past couple of decades. us economic policies are being altered in a way which will support the economy. for example, as we point out in our most recent statement on monetary policy, the us government sector's financial balance swung towards deficit by about 4 per cent of gdp over the past two years and will continue in that direction in 2003. some of this movement is the effect of the economy on the budget rather than actual measures taken, but discretionary budget measures have been quite substantial. in addition, us interest rates have fallen significantly, and are at their lowest levels in four decades. contrary to what we hear in some quarters, macroeconomic policies are still effective. the likelihood is that the assistance being given by these policies will continue to support the us economy in the period ahead. the fact that the us financial system is not apparently seriously impaired by the fall - out in the financial markets is also a major bonus. but getting over the legacy of the boom will still take some time. in the interim, of course, the us economy is more vulnerable to the effects of other adverse shocks which may come along than ideally we would like. so while it is sensible, in my view, to be an

of total household debt at that time than they are now. second, the average rate of interest on personal loans is usually higher than for mortgages, and they rose much more in the late 1980s than did mortgage rates. both these series represent averages across the household sector. but experience differs markedly between households. slightly less than 30 per cent of households have an outstanding mortgage against their own house ; about 40 per cent of households have no mortgage debt on the dwelling they own. these proportions are little changed from a decade ago. based on data from the australian bureau of statistics ( abs ) and the australian taxation office, the proportion of households owning investment properties is around 8 to 10 per cent. some, though not all, of these properties are partly debt financed. taking these facts into account, and allowing for the fact that households with debt have, on average, incomes about 30 per cent higher than the average for all households, interest and principal repayments probably account for something like 20 per cent of disposable income among those households who have debt. this has most likely increased by about 6 percentage points over the past decade. in summary, a closer analysis of debt servicing requirements suggests that the commonly quoted fact that the total interest servicing cost is less than in the late - 1980s peak obscures the fact that debt servicing costs are on an upward trend - which only stands to reason given that overall debt levels are rising. further, servicing costs of those households with debt are considerably higher than indicated by the average experience across the household sector, and have risen a good deal over the past ten years. gearing ratios turning to consideration of housing leverage - that is, the ratio of housing debt to the value of housing assets - graph 4 in the speech showed that leverage had risen from about 13 per cent to about 20 per cent over the past decade. however, again this is the average across all households, including the majority of households who carry no debt at all. arguably a more relevant measure is the leverage of those households which do carry debt - namely, owner occupiers with a mortgage still outstanding, and investors. some estimation is involved here because the relevant data are not directly observable. on the assumption that the 30 per cent of households with debt against their homes also own 30 per cent of housing assets, we estimate that the ratio of debt to assets for indebted owner occupiers is about 46 per cent, up from 36 per cent ten years earlier. among investors, the