high levels and this will put the focus back onto productivity growth and economic reform as the drivers of increasing living standards. the second issue is the importance of ensuring that the economy remains flexible, and can respond to unexpected developments. my colleagues at the reserve bank and i have spoken at length on previous occasions about the key elements here. having a flexible exchange rate has been one of the great stabilising forces in the australian economy over the past 30 years. labour market flexibility is also important. so too is retaining the flexibility of both monetary and fiscal policy to respond quickly to unexpected developments. to this list, i would add the importance of having a highly trained and educated workforce. not only does education help lift productivity, but it also makes the economy more flexible and this helps lower risk. the third element that affects the nature of the risks is the way that investment is financed. historically, much of the external funding for business investment has come from banks. while bank financing is likely to remain important for many firms, a greater share of investment is likely to be financed from other sources than has been the case in the recent past. this may not be welcome news for the banks, but having investment financed from a variety of different sources helps reduce aggregate risk. over the years ahead, foreign direct investment and capital market raisings by firms in the resources sector are both likely to play a more important role than they have over the past decade. this means that some of the risks – and, of course, some of the expected returns – from the rapid increase in australia ’ s capital stock will be shared with foreign investors. the fourth element of risk management is the response of domestic consumption to the improved outlook. the textbook says that if future income prospects improve, the level of national consumption – either private or public – should increase now. but the textbook also says that the lower our appetite for risk, or the greater the uncertainty about the future, the smaller should be any immediate adjustment in consumption. it also says that the more uncomfortable we are about the possibility of a future decline in consumption if things do not work out well, the smaller should be adjustment now. if we look back at our own economic history, the early 1980s provides a good example of what can happen if the adjustment is too quick. in the first couple of years of that decade, there was much optimism about the future of the resources sector, largely reflecting the rise in oil prices as a result of opec ii. this optimism was translated quickly into higher

explored in the past to investigate factors that determine prices and the degree of price dispersion, much in the tradition of our long - standing efforts under the umbrella of the eurosystem inflation persistence network. 15 the data, which consist of 3. 5 million observations on the price and quantity of individual products sold, have confirmed that competition at producer and retail level is a key factor affecting micro price - setting. insights gained from the use of online and scanner data have also encouraged the ecb to make micro - price research a strategic research priority between 2018 and 2020. the first step is to pick up where the inflation persistence network left off, by resuming the collection of micro data underlying the consumer price index and the producer price index and complementing them, where possible, with scanner and online price data. 16 collaboration within the eurosystem will once again be vital for the success of this ambitious project. the ecb, with the help of the national central banks, also draws on big data to help improve business cycle analysis. google search data, for example, have been suggested as a potentially valuable source of data for policymakers. back in 2012, hal varian and co - author showed that google searches can help predict economic activity. 17 building on this idea, escb staff have explored the possibility of nowcasting unemployment using volumes reported by google trends for a large number of search queries broadly related to unemployment. they find that many of the search terms indeed correlate with unemployment and may reduce forecasting errors by up to 80 % by comparison with naive benchmark models. 18 job search and related google search quotes have also been found to be strong predictors of variations in subjective wellbeing. 19 similar initiatives are underway for more leading indicators. related to this, electronic payment data from credit cards and cash withdrawals from atms have been shown to help forecast private consumption as well as gdp growth, provided that they are made available in a timely manner. 20 these data are also less prone to revision than traditional national accounts data. our internal findings so far suggest that, in some euro area countries, the correlation between payment data and private consumption is encouragingly strong, making their systematic use in forecasting an option for policymakers. technological progress in exploiting textual information can provide similar benefits. research shows that information extracted from business newspapers can be used to nowcast quarterly gdp growth and outperforms traditional forecasting methods at turning points. 21 4 / 9 bis central bankers'speeches