building in response to the faster population growth. indeed, it took the better part of a decade for this adjustment to take place ( graph 4 ). this slow adjustment is one of the factors that contributed to the large increases in housing prices in some of our cities over recent times. the adjustment, though, has now taken place, with growth in the number of dwellings exceeding growth in the population over the past four years. https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 4 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 4 i have spoken about these adjustments on previous occasions. rather than cover this material again, i would like to focus on something that receives less attention, but is no less important – that is, how the changes in our population dynamics have affected some of australia's key demographic indicators. of particular importance is the fact that, on average, new migrants to australia are younger than the resident population. workers coming to australia tend to be relatively young and so too, obviously, are most students. the median age of new migrants is between 20 and 25, which is more than 10 years younger than the median age of the resident population. over the past five years, over 80 per cent of net overseas migration has been accounted for by people under the age of 35 ( graph 5 ). https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 5 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 5 this inflow of younger people through immigration has significantly reduced the rate of population ageing in australia. the median age of australians is currently 37. back in 2002, australia was expected to age quite quickly, with the median age projected to increase significantly to over 45 by 2040 ( graph 6 ). but after a decade of increased immigration of younger people, the latest estimate is that the median age in 2040 will be around only 40 years. this is a big change in a relatively short period of time, and reminds us that demographic trends are not set in stone. https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 6 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 6

the labour market will recover as the output gap closes and the divine coincidence that i talked about earlier will eventually be re - established. this happens as output increases, firm creation and business investment picks up, and capacity is rebuilt. as this occurs, the signals coming from the labour market gap and output gap will become more consistent. of course, there is a risk that additional capacity won ’ t be added fast enough to keep the output gap from temporarily going positive. an economy pushing up against the limits of its capacity may be just what is required to signal the need for additional investments and to draw workers back into the labour force. there is uncertainty about how much potential can be rebuilt, and we need to take this into account in our risk - management approach to monetary policy. our inflation - targeting framework gives us flexibility on the timing to achieve the inflation target while also taking into account other important dimensions of the economy – such as financial stability and the economy ’ s potential. 19 stifling the rebuilding phase of the recovery could mean lost economic opportunity. that being said, if potential output growth turns out to be lower than we think, we have the tools to bring inflation back to target. conclusion there is no doubt that the canadian economy has room to grow. the stronger u. s. economy, a lower dollar and our monetary policy response will work to keep the recovery in canada on track and to get inflation sustainably back to target. there will be some adjustments across the country as non - energy exporters take on the mantle of growth. as this happens, canadian firms and workers will need to demonstrate the impressive ability to adjust that we have seen in the past. monetary policy is contributing to this effort by providing an environment of low and stable inflation, while supporting the adjustments needed to return the economy to sustained and balanced growth. we ’ ll get there and it will be a very good thing for canada. m. carney, “ a monetary policy framework for all seasons ” ( speech to u. s. monetary policy forum, new york, new york, 24 february 2012 ). bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches