. 5 - 6. 3 - 3. 4 - 1. 3 - 6. 4 0. 8 0. 1 - 0. 6 - 0. 2 2. 9 memo : mexico united states germany japan 17. 6 15. 5 21. 8 34. 8 19. 4 16. 0 22. 2 30. 4 - 5. 2 - 1. 2 - 0. 9 2. 6 0. 1 - 3. 6 - 2. 0 - 0. 6 there is not a lot of point in trying to identify precisely whether the capital flows were more supply - driven than demand - driven, because we have known since marshall that the outcome depends on the two blades of the demand and supply scissors. nevertheless, it might be worth noting that the financial flows were often significantly larger than the amount that could be absorbed in terms of real flows of goods and services - i. e. the capital inflow was larger than the current account deficit : graph 6 illustrates this. graph6 : private capital inflows and the current account as a percentage of gdp % • norway chile ( 89 - 94 ) indonesia - 2 colombia • • • • • • sweden argentina ( 92 - 93 ) finland • philippines ( 89 - 94 ) - 4 malaysia ( 89 - 94 ) • venezuela ( 92 - 93 ) • thailand ( 88 - 94 ) • mexico ( 89 - 94 ) - 6 malaysia ( 80 - 86 ) • • - 8 - 10 % private capital inflows source : world bank we will return, later, to the issue of whether the policy problems created by these huge capital flows ( and the resultant rapid growth of domestic credit ) could have been avoided by a different exchange rate regime. the basic point made here is that these countries embodied significant profit opportunities ( albeit with lots of opportunities to over - invest and invest in the wrong industries ), and that it was normal for large amounts of capital to flow from the “ old world ” of savers towards the new opportunities available in these countries. indonesia also understood that it was difficult to put in place the necessary prudential structure in time to keep pace with the burgeoning capital inflows. the central bank governor has noted : “ we started building the foundations of a house but suddenly we had to host a party ”. the second major issue behind exchange rate fluctuations revolves around perceptions of how the economy works - “ the model ”. what is the “ mind - set ” of participants in the market - what do they think

christopher kent : slowdown in china ’ s growth - implications for australia remarks by mr christopher kent, assistant governor ( economic ) of the reserve bank of australia, at the ubs australasia conference 2015, sydney, 17 november 2015. * * * i thank ivan roberts for help in preparing these remarks. i would like to thank ubs for the opportunity to participate in this conference. given its importance to the australian economy, the bank monitors developments in china closely with a team of economists in both sydney and beijing. the easing in the growth of the chinese economy over the past year or so has two related parts. the economy is slowing as it matures, and this is to be expected. overlaying that, there has been a substantial slowing in the industrial sector, linked in part to earlier excesses in construction. how all of this will play out and the effects on the australian economy are uncertain. i ’ ll briefly highlight some possibilities. let me be clear though, many of these have positive implications for our economy. it is natural for the speed of china ’ s economic development to ease and for its nature to evolve : • part of this reflects slower growth of the working - age population, which is now in decline. other than increasing the retirement age, there is little that can be done to alter that in the coming years, notwithstanding the ending of the one - child policy. • however, growth continues to be supported by the process of urbanisation, which uses commodities intensively. this has further to run, albeit at a more gradual pace. • productivity growth appears to be slowing as windfall gains from earlier reforms have waned. but there remains a large gap between productivity in china and in advanced economies. that gap could be closed more quickly via additional reforms to allow a greater role for market forces in allocating productive resources. the authorities have expressed support for such reforms. • the authorities would also like to see growth rebalancing from investment towards consumption. that is happening gradually. it is also being accompanied by a rise in the share of activity accounted for by the services sector as the economy develops and household incomes rise. while these longer - run changes imply a decline in the growth rates of investment and industrial production, both have also experienced a noticeable cyclical slowing over the past year or more. as earlier excesses in residential construction gave rise to a large stock of unsold housing, house prices declined and so too did housing construction. sales and prices have recovered