though the availability of finance for commercial property development remains very tight. employment has grown strongly over the past year and the unemployment rate has fallen back to a range of 5 – 5½ per cent, which historically has indicated a degree of tightness in the labour market. other indicators, however, suggest that the overall labour market may not be as tight as suggested by the unemployment rate. the financial side of the economy remains subdued. household credit is growing at a moderate pace while business credit remains soft. that softness is largely in relation to large borrowers ; lending to small businesses has increased at an annual rate of about 5 per cent over the first nine months of 2010 ( graph 17 ). graph 17 we have spent a fair amount of time at the bank looking at the question of why business credit is so soft. it is clear that banks had tightened lending standards sharply following the onset of the global financial crisis, which no doubt contributed to the slowdown in business lending. this has been most acute in the area of commercial property, where there has been a sharp cutting back, particularly by foreign - owned banks. more recently, there are signs that banks are becoming more willing to lend, at least in areas other than commercial property, but demand for loans, in aggregate, is not very strong. it seems that the investment that is taking place in australia, particularly in the case of the mining sector, is largely being financed outside the banking sector, either from retained earnings, direct investment from overseas or capital market raisings. the exchange rate is also clearly having an impact on business conditions. it has risen to post - float highs recently, although the real effective exchange rate remains below the levels recorded in the resources boom of the early 1970s ( graph 18 ). graph 18 a rise in the exchange rate is a natural consequence of a resources boom and, at the aggregate level, is helpful in allowing the economy to adjust. nonetheless, some sectors of the economy are adversely affected. a notable example at present is the tourism industry, where there has been a sharp increase in the number of australians travelling abroad rather than taking holidays domestically. this is having a severe effect on traditional holiday destinations in queensland, areas which are also suffering from overbuilding in the pre - crisis years. given this double impact, it is not surprising that these areas are currently experiencing among the highest rates of unemployment in the country. the bank is monitoring developments in these areas closely. the outlook while there are differences between sectors and between regions, the

to make a substantial reduction in systemic risk. or, to be more precise, how to reduce systemic risk without restraining or patronizing financial markets but rather by improving their functioning. a lot of work is under way to find ways of doing this. improved transparency should foster the self - control and self - discipline of the markets. that includes different aspects such as : more and better data on the debt structure of individual countries, the application of standards for banking supervision, improved disclosure of risk positions of market participants. of course, in the case of a national sovereign crisis, financial assistance too might play a role. therefore, we have agreed to fill up the imf ’ s reserve tanks. such assistance, however, has to be bound to conditionality, to an incentive to redeem the official credits and to a fair burden - sharing between official and private sectors. if the talk of a lender of last resort means only that kind of financial assistance, i don ’ t mind. even though that expression might not be absolutely accurate. but we should not argue about words. but if lender of last resort in a broader sense means that draining liquidity and offering generous or even unlimited credit lines should be regarded as main response and that the international community should place its highest priority on such measures, i would be strongly opposed. a lender of last resort of that kind may be of intellectual interest for academic textbooks. in reality, such a role for the imf or another institution would severely hamper the functioning of the markets. the main point is : whatever the international community intends to do, the measure should — as far as possible — avoid creating incentives for moral hazard behaviour. for domestic policy - makers, this means that international assistance must not be seen as insurance either against dangerous exchange rate experiments or against a loss of credibility. for the markets, there should as few incentives as possible to underrate country - specific risks based on the hope of a later bail - out. so, in the first place, financial crisis and systemic risk do not lead to the question of the lender of last resort. instead, they lead to the question how to improve the framework. and that was the background to my report i presented to the group of seven ( g - 7 ) ministers and governors at their meeting in bonn on february 20, 1999. professor illing asked me to add some remarks on that report. i will follow that suggestion. iii as you know, my proposal to the g - 7 included con