move on to the european economy. the euro area economy has continued to see moderate recovery, as can be observed in positive growth in the real gdp for eight consecutive quarters ( chart 3 ). the european economy has recently been seeing a clear increase in private consumption given the improvement in labor market conditions, as well as reflecting the effects of the decline in crude oil prices and of a rise in stock prices. it also has been seeing a recovery trend in business sentiment and industrial production resulting from an improvement in exports and corporate profits due to the depreciation of the euro. as for prices, the year - on - year rate of change in the harmonized index of consumer prices ( hicp ) for all items, which had once been negative, has recently recovered to a slight positive, and concerns about deflation have been alleviating. going forward, the european economy is expected to continue to see moderate recovery as depreciation of the euro and the monetary easing measures by the european central bank ( ecb ) are taking effect. currently, the largest uncertainty over europe is the sovereign debt problem in greece. at the euro summit this month, leaders agreed in principle that they were ready to start negotiations on a european stability mechanism ( esm ) program on the condition that various requirements would be met by greek authorities. the scenario in which greece will exit from the eurozone was avoided, and global financial markets have reacted positively. that said, greece is still confronted with large problems ; namely, reorganizing its economy and financial system, as well as fiscal consolidation. in particular, i believe that it is essential for the reconstruction of the greek economy to restore its financial intermediary function through swift recapitalization and liquidity assistance to financial institutions. the bank strongly expects that there will be steady progress toward resolution of the sovereign debt problem in greece with support by the institutions and european countries. now, turning to emerging economies, the growth momentum of the chinese economy has been slowing against the backdrop of the deceleration in fixed asset investment – under excess production capacity – and of continued adjustments in the real estate market ( chart 4 ). in this situation, the chinese authorities have been taking both fiscal and monetary measures toward underpinning the economy in a more proactive manner since spring. going forward, due attention needs to be paid to the possibility that excess production capacity and adjustments in the real estate market will be prolonged, but the economy is likely to follow a generally stable growth path, although the

malcolm edey : the evolving risk environment speech by mr malcolm edey, assistant governor ( financial system ) of the reserve bank of australia, at the australian shareholders association ( asa ) investor forum, sydney, 18 february 2016. * * * this is an expanded and updated version of a speech presented in november 2015. malcom e ( 2015 ), “ the risk environment and the property sector ”, speech at the australian property institute ’ s queensland property conference, gold coast, 6 november. thanks for the opportunity to speak to you today. i have taken as my subject “ the evolving risk environment ”. as you know, the reserve bank has a longstanding mandate to promote financial stability. the way we interpret that mandate, its place in the wider central banking framework, and its interaction with the mandates of the other financial regulators, are large topics in themselves. 1 for today, i simply note that one of the ways we seek to promote financial stability is by providing regular analysis of system risks, particularly through our half - yearly financial stability review. we do that partly to inform the policy debate, but also because it is important that lenders and investors are well informed about the risk environment, so that they can make prudent decisions about the risks they choose to accept. as investors in the share market, you will be well aware that investment is a risky activity. in the early part of this year we have seen some significant falls in equity prices and higher volatility in equity markets around the world. there has been significant volatility in other markets too, notably including large falls in oil prices. there is no shortage of commentators offering interpretations of these events and predictions of what might follow. i am not going to be offering those sorts of predictions today. instead, i think the way i can best contribute to your thinking about these things is to place them in the wider context of the evolving financial risk environment over the past few years. the post crisis environment in many ways the current situation continues to be shaped by the aftermath of the global financial crisis ( gfc ). the epicentre of the crisis is usually dated to the collapse of lehman brothers in september 2008, and the general recovery that we have had since then began about six months later. on that basis, we have been in a period of global economic recovery now coming up to about seven years. in broad outline, this has been a period marked by : • a return to reasonably solid growth in world gdp, at rates either