##s period contribution to gdi mid 1970s year to mar 1975 – 1. 7 early 1980s year to mar 1982 – 0. 6 early 1990s year to jun 1991 – 1. 2 even if we add the export volume effects and the terms of trade effects together ( noting that they usually cover different, but roughly adjacent, periods ), the combined effect in any one year would not be enough to turn a reasonable positive growth rate into a negative one. the other conclusion that can be drawn from this table is that the contributions tend to be getting smaller, particularly for the most recent recession in the early 1990s. diagram 2 : trade prices index march 1980 = 100 prices in sdr terms index imports exports index terms of trade index 1981 1985 1989 1993 1997 2001 i would like to say a little more about the terms of trade before i leave that subject. as i said earlier, there has been a tendency to see australia as being some sort of “ loser ” in the international economic competition because of our vulnerability to terms of trade movements. there is an assumption that our terms of trade are subject to a long - term downward trend, that they are also cyclically sensitive, and that both of these characteristics stem from an unfortunate export mix, with its over - representation of “ commodities ”. i think this is a somewhat dated view for the following reasons : • on the question of long - run trends, it should be noted that the low point in our terms of trade was as far back as 1986 / 87. the two troughs since then have been at successively higher levels. • on the question of cyclical sensitivity, we have had conflicting signals over recent years. our terms of trade fell between mid 1997 and mid 1998 as a result of the asian crisis, but since that time, i. e. over the past three years, they have risen, even though the last of those three years has been a very weak one for the world economy. they are now above the peak they reached immediately before the asian crisis. • the focus on our export prices is misplaced because the really interesting action seems to be taking place on import prices. they are not as cyclical as export prices, but they have shown a more pronounced downward trend over the 1990s, particularly over the past five years. we know that a lot of this is due to the sharp falls in the prices of telecommunications and computing equipment, but it is more widespread than this. of the 29 categories of goods for which the abs publishes import prices, 26

over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. in this context, the concerns of private investors about seniority will be addressed. furthermore, the governing council may consider undertaking further nonstandard monetary policy measures according to what is required to repair monetary policy transmission. over the coming weeks, we will design the appropriate modalities for such policy measures. let me now explain our assessment in greater detail, starting with the economic analysis. on a quarterly basis, euro area real gdp growth was flat in the first quarter of 2012, following a decline of 0. 3 % in the previous quarter. economic indicators point to weak economic activity in the second quarter of 2012 and at the beginning of the third quarter, in an environment of heightened uncertainty. looking beyond the short term, we expect the euro area economy to recover only very gradually, with growth momentum being further dampened by a number of factors. in particular, tensions in some euro area sovereign debt markets and their impact on financing conditions, the process of balance sheet adjustment in bis central bankers ’ speeches the financial and non - financial sectors and high unemployment are expected to weigh on the underlying growth momentum, which is also affected by the ongoing global slowdown. the risks surrounding the economic outlook for the euro area continue to be on the downside. they relate, in particular, to the tensions in several euro area financial markets and their potential spillover to the euro area real economy. downside risks also relate to possible renewed increases in energy prices over the medium term. euro area annual hicp inflation was 2. 4 % in july 2012, according to eurostat ’ s flash estimate, unchanged from the previous month. on the basis of current futures prices for oil, inflation rates should decline further in the course of 2012 and be below 2 % again in 2013. over the policy - relevant horizon, in an environment of modest growth in the euro area and well - anchored long - term inflation expectations, underlying price pressures should remain moderate. risks to the outlook for price developments continue to be broadly balanced over the medium term. upside risks pertain to further increases in indirect taxes, owing to the need for fiscal consolidation, and higher than expected energy prices over the medium term. the main downside risks relate to the impact of weaker than expected growth in the euro area, in particular resulting from a further intensification of financial market tensions. such intensification