last year and are currently a bit above longer - run average levels. admittedly, households do not feel the same ebullience they did for some years prior to the financial crisis in the major countries. but that degree of confidence, with its associated patterns of saving and increasing leverage, was unusual, and is not likely to recur. our expectation is that consumer demand will record growth roughly in line with the trend rise in income over the period ahead. housing investment should strengthen given that several factors are supportive – interest rates are low, housing prices are tending to rise, gross rental yields have increased, population growth remains strong and is even picking up a little. admittedly, we are as yet very early in this phase. the increased capacity to extract and ship raw materials will see export volumes continue to strengthen, probably quite substantially, over the next couple of years. some other categories of exports seem to have stopped declining, notwithstanding that the exchange rate remains high. putting all that together, while growth was probably about trend in 2012 as a whole, our sense is that the economy has entered 2013 at a pace a little below that. we have been inclined to think that the near - term outlook could be for more of the same, but things are likely to strengthen further out. we are, of course, conscious that forecasts have a considerable margin of error. we have put some emphasis on this point in the way we present our forecasts in recent times. stepping back from the numbers, in broad terms, the economy will be adjusting to the peak of the mining boom and some other areas of demand will have room to grow more quickly than they have in recent years. this transition will not necessarily be seamless – these things seldom are – but there are reasonable prospects of it occurring over time. as we go through this period, the pressures to adapt business models, contain costs, increase productivity and innovate will remain. but such adjustments are actually positive for longer - run economic performance. inflation is currently consistent with the target. the high exchange rate has lowered prices for tradable goods and services and so helped to hold down measures of inflation over the past couple of years. but some domestic costs have also slowed, in response to softer demand conditions in some areas, even as prices for things such as utilities have risen sharply. the effect of the carbon price on the cpi so far has, as best we can judge, been broadly as expected. our assessment is that inflation will be consistent with

contributed to foster an environment where it became more difficult for authorities to act promptly when there were signs that the economy was overheating. we all know where this ended up. that is why the g20 mutual assessment process which aims to bring about strong, sustainable and balanced growth and reduce persistent large imbalances, and the g20 discussions on the ims, such as dealing with global capital flows and global liquidity, are interlinked. combined, they are expected to work to enhance the long - term stability of the global economy and financial system. what is important here is that the mutual assessment process will likely be, at least in its initial phase, a process through which countries better understand each others ’ policies and the implications of their domestic policies on other countries. this will become the basis for constructive dialogue aimed at reaching an optimal combination of economic policies across multiple countries. the reform of the ims will also be a long - term project. a caveat here in this global debate is that there will not be any single bis central bankers ’ speeches model or concept applicable to all countries and situations. a thorough analysis, taking into consideration each country ’ s unique situation, both cyclical and structural aspects, will be required. even the imf with its immense amount of expertise and resources has struggled to identify unsustainable imbalances over the years. in 1989, in the article iv discussion for japan, staff noted that inflation in japan was not “ a matter of concern ” and therefore “ no compelling reason ” could be found to tighten monetary policy. in the 2007 article iv staff report for ireland, it explained that “ economic performance remains impressive ” and that “ banks have large exposures to the property market, but stress tests suggest that cushions are adequate to cover a range of shocks. ” the imf staff report for the us in 2007 also presented “ a soft landing ” as the most likely scenario. it also noted that “ financial innovation and stability have underpinned us economic success. ” the limitations of imf surveillance in the run - up to the current global crisis are detailed in the recently published ieo1 report. i am not trying to single out the imf for criticism. nobody was completely successful in recognizing beforehand the emergence of bubbles and the huge negative impact after its collapse. i simply wanted to highlight that when a single approach toward assessing an issue dominates the intellectual climate, it can cloud our judgment in finding emerging risks which could be seen when approached from a different