. it isn ’ t, however, only a cyclical matter. this contrast between the economic performances of the key emerging countries and those of the older industrial economies in the past few years is seeing a marked acceleration in the shift in the world economy ’ s centre of gravity towards the east ( or west, if viewing from north america ). since the beginning of 2008, asia ( excluding japan ) has accounted for about 70 per cent of the growth in global gdp ( measured on a purchasing power parity basis ). it has also accounted for about 70 per cent of the growth in global demand over that period. this compares with a figure of about 30 per cent over the period 2000 – 2007. it has often been said that more domestic demand is needed in asia to help “ rebalance ” the global economy. there may have been a structural sense in which asian saving rates were “ too high ” and saving in some other countries too low. but it is not at all clear that more demand growth in asia is desirable at present. after all, global gdp growth has been strong, and prices for most commodities have been rising. just at the moment, from a global perspective, what we need is not so much faster domestic demand growth in asia, but a way of supplying more of asia ’ s demand for goods and services from the parts of the world where excess supply remains – mainly the north atlantic countries. of course exchange rates are relevant here. moreover, there is a secular increase in living standards occurring in asia and changes in consumption patterns are accompanying that. energy intensity is rising quickly with income. the steel intensity of production is already high in china but, with china seeking strong overall growth for many years yet, steel consumption could well continue to increase at a rapid pace. in india, steel intensity has a long way to rise yet. in many developing countries, higher living standards are also prompting changes to diets. the already clear trend towards higher protein consumption in emerging countries such as china potentially has major implications for demand ( and prices ) for livestock and grain feed globally. so it is not really surprising that rapid economic growth in asia is placing upward pressure on prices for foodstuffs, energy and minerals. there may be speculative demand adding to these pressures at the margin. but speculators can ’ t hold up prices over the long run. these big changes, which appear to be rather long - running, surely are mainly a result of powerful, and rather durable, fundamental forces. what is new

and the set of relative prices that goes with it. it seems to be doing so more quickly than was generally assumed. australia australia sits in an interesting position here. like our asian neighbours we were affected by the events of late 2008. but the downturn was fairly brief. we were in a position to apply a liberal dose of stimulus to the economy, which was done in a timely fashion. the banks remained in good shape. hence recovery began in the first half of 2009. a strong asian recovery has also helped australia. as in other developed countries, our consumers feel the effects of higher commodity prices as a reduction in real income. but since australia is also a producer, the big rise in demand for energy, resources and food is expansionary for the economy. in fact, with our terms of trade at by far their highest level, on a five - year average basis, in more than a century, these events are very expansionary indeed. a very large increase in investment in the resources sector is under way and has a good deal further to run yet. just recently, we have been experiencing growth close to trend, relatively low unemployment – about 5 per cent – and moderate inflation, about 2¼ per cent in underlying terms. in comparison with the experience of the past generation, that is a pretty good combination. looking ahead, our job is to try to manage the terms of trade and investment booms. historically, australia has often not managed periods of prosperity conferred on us by global trends terribly well. on this occasion, we have to do better. we have to take the opportunity to capitalise effectively on some very powerful trends in the global economy to which we are, almost uniquely, positively exposed. a few things are working in our favour. one is that the exchange rate is playing a role of helping the economy to adjust to the change in the terms of trade in a way that it was prevented from doing on numerous previous occasions. another is that, at least so far, households are behaving with a degree of caution, insofar as spending and borrowing are see, for example, the un food and agriculture organization ( fao ) discussion paper “ how to feed the world in 2050 ”, which was prepared for a high - level expert forum of the same name held in rome on 12 – 13 october 2009. the document, and other background information, is available at : < http : / / www. fao. org / wsfs / forum2050