positive development and would help improve our resilience. with interest rates so low, now is a good time for us to move in this direction. hopefully, the changes might encourage a few more people to think about the merit of taking out very large interest - only loans when interest rates are near historical lows. so the rba welcomes these latest changes. it is important, though, that we are all realistic about what these and other prudential measures can achieve. as i said before, the underlying driver in our housing market is the balance between supply and demand. the availability of credit is undoubtedly a factor that can amplify demand, but it is not the root cause. this assessment is consistent with the observation that housing market dynamics currently differ significantly across the country, despite australia having nationwide financial institutions and the level of interest rates being the same across the country. it is hard to escape the conclusion that we need to address the supply side if we are to avoid ever - rising housing costs relative to our incomes and to avoid the attendant incentive to borrow that is created by rising housing prices. the various prudential measures do not address the underlying supply - demand issues. but they can reduce the risk from the financial side of the housing market while the underlying issues are addressed. these prudential measures help lessen the amplification of the cycle we get from borrowing and reduce the risk of developments on the financial side weakening the resilience that 3 / 4 bis central bankers'speeches our economy has exhibited for many years. ideally, this would be achieved by financial institutions acting themselves, without the need for prudential guidance. but sometimes prudential guidance can help the whole system adjust. the calibration of this guidance is not precise or straightforward so we need to keep matters under review. the council of financial regulators will continue to assess how the system responds to the various measures so far. it would consider further measures if needed. as i have said, though, in the end addressing the supply side of the housing market is likely to prove a more durable way of dealing with the concerns that people have about debt and housing prices than detailed supervisory guidance. so that is enough on debt and housing. before finishing, i would like to recognise that tomorrow we are having the official opening of our new banknote distribution centre and vault at craigieburn, in outer melbourne. this new centre is an important investment for us in victoria. it will help us manage the task of issuing

to support saving. this requires a sizeable decline in domestic absorption – the income levels and growth rates which prevailed before the crisis are no longer the appropriate benchmarks. governments have to stabilise the public deficit, while households have to reduce their debt which had grown rapidly during the housing bubble. in addition, measures to strengthen export sectors, while maintaining open markets, would also help to reduce current account deficits. the g20 recently made an attempt to address the problem of imbalances at the political level : in september 2009 the “ framework for strong, sustainable and balanced growth ” was launched. this framework includes a pledge to “ promote more balanced current accounts ”. as a general objective, this certainly points in the right direction and the framework could indeed usefully support the process of restoring more balanced global growth. it is backed by all the major stakeholders and is driven at the highest level by the g20 leaders. moreover, a mutual assessment process forms part of the framework. this process could provide an opportunity for exerting peer pressure among members to undertake the required structural reforms. regarding the design of the relevant supervisory mechanism some progress was made during a meeting of the g20 in mid - february. though difficult negotiations still lie ahead i am confident that they will eventually lead to viable results. 4. conclusion ladies and gentlemen, there is no question that the problem of global imbalances has to be addressed. however, to be successful, it is essential that efforts do not focus on symptoms but rather are directed at the structural causes of the imbalances. to be more specific, as current accounts reflect a very complex set of determinants, any attempt to steer them directly within more or less arbitrary limits would overburden the relevant authorities. similar objections apply to attempts to stabilise major exchange rates around some purported equilibrium target values. such attempts at macroeconomic fine - tuning raise public expectations that economic policy cannot live up to ; rather, they risk creating new frictions that require further interventions. instead, it is up to the national authorities to implement the necessary structural reforms to allow for a market - based and lasting reduction of imbalances. bis central bankers ’ speeches