is actually rather scant over the floating era as a whole. arguably some of the bigger misalignments occurred under previous exchange rate regimes. but what of recent levels of the exchange rate? they have been blamed for many disappointing corporate results and triggered numerous restructurings, instances of “ offshorings ” and job shedding. the only other factor so frequently offered to explain bis central bankers ’ speeches disappointment is “ consumer caution ”. one can imagine that many people would see this as prima facie evidence of the exchange rate being significantly misaligned. there are a few difficulties in evaluating that claim. first, very high terms of trade can be expected to lead to some loss of “ competitiveness ”, as noted above. just how much of this would be expected depends, among other things, on how permanent the terms of trade rise is, but this episode has been very persistent so far. the euphemism “ structural adjustment ” hardly conveys the difficulties faced by firms and their workforces affected by these forces. but a big and persistent shift in relative prices, which is what the terms of trade shift amounts to, was always going to produce some such effects. a further difficulty in assessing the exchange rate ’ s level lies in that very persistence. the relationship between the exchange rate and the terms of trade has, broadly speaking, continued to hold ( graph 5 ). nothing looks very unusual right at the moment. but this relationship is estimated over a period in which the changes were generally cyclical. it is at least conceivable that a large and persistent rise in the exchange rate may have effects on the economy beyond those discernible from the experience of the past thirty years, if previous rises in the exchange rate were not long - lived enough to cause significant structural change. this is a possibility the reserve bank has noted in the past couple of years. 6 there is at least one more complication in assessing the exchange rate ’ s recent behaviour and that is the extraordinary monetary policy measures that are being undertaken in the major economies of the united states, japan and the euro zone. these too are outside any historical experience. such measures are in place because they are required by the circumstances of those economies, but there is no doubt that they have fostered the so called “ search for yield ”. that, after all, was the whole point. added to this is the lessening, even if only at the margin, of perceived creditworthiness of a number of sovereigns

it is useful to put this change in an international context. to do this, the rba's staff has examined demographic trends and projections over the next quarter of a century for 37 advanced economies using un data. [ 2 ] this next graph shows four key demographic variables for australia and the range of outcomes across these countries ( graph 7 ). australia stands out in a number of dimensions : first, our median age of 37 makes australia one of the youngest countries among the advanced economies. we are also ageing more slowly than most other countries, which means that we are projected to stay relatively young. this is different from the earlier projections, under which we were expected to move to the middle of the pack. second, we have a higher fertility rate than most advanced economies. australians tend to have larger families than those in many other countries. third, our average life expectancy is at the higher end of the range, and is expected to continue to rise. fourth, the old - age dependency ratio is rising, but less quickly than in most other countries. our relative youth and higher fertility rates mean that the dependency ratio is expected to remain lower than elsewhere over the next generation. beyond that, on current projections, it is then expected to increase quite significantly. https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 7 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 7 so, in summary, we are better placed than many other countries. the movement to australia of large numbers of young people over the past decade has changed our demographic profile in a positive way. this has implications for future economic growth and the pressures on government budgets. this immigration has also boosted the nation's human capital. ageing and labour force participation i would now like to turn to some of the implications for labour force participation of our changing demographics. while we remain a relatively young country, we are still ageing. even with the large increase in relatively young migrants, the share of the australian population aged 15 – 64 is declining, after increasing for many years ( graph 8 ). this decline is projected to continue for at least a generation, reflecting a combination of the ongoing transition of baby boomers into retirement ages, lower fertility rates and increased life expectancy. by 2040, around 20 per cent of the population is expected to be over 65, compared with 15 per cent currently. https