warm and not too cold, and stable disequilibrium. this is an episode in our history where variability of growth in real output has declined along with the variability in inflation. along the way, imbalances in the global economy began to build up. the imbalances manifested themselves in huge trade surpluses and an accumulation of foreign exchange reserves in the countries which relied on export - oriented growth – including those in the asian region. they were reflected in the dollar revenue which was subsequently reinvested in us financial markets – which in turn helped to finance the us saving deficit, permitting these imbalances to remain uncorrected for a prolonged period of time. and as a result, asset price bubbles were also allowed to persist for a prolonged period as well. all was well as long as everyone continued to grow. however, as emerging markets opened up, global demand, and particularly demand from growing economies like china and india, drove up the prices of oil and other global commodities. many economists began to predict a structural shift in global demand and changing dynamics of global inflation which would effect domestic prices and make inflation higher and more persistent. 3. coping with the global financial crisis at the same time, problems were brewing on the financial side in the advanced economies. i will not lay out the causes of the financial crisis here, as that has been discussed widely elsewhere. in a nutshell, the slowdown in the us housing market, coupled with a mix of troubled banking practices, regulatory blind spots, and absolute faith in the market mechanism, among other things, led to a financial crisis in advanced economies. but the important point here is that financial innovations, coupled with technological advances in communications, helped to link financial markets across the globe. this globalization of financial services allowed the collapse of major financial centers to spread to the rest of the globe so efficiently. in fact, these very financial instruments which had been earlier used to diversify risks turned out to be the very means for spreading contagion. the spread of the impact of the financial crisis onto the global real economy through the trade channel changed the world ’ s economic outlook rapidly and dramatically. this had a drastic impact on the inflation outlook, and the threat of inflation has rapidly shifted to one of possible deflation. at the same time, central banks are running out of traditional monetary policy ammunition to fight the slowdown in growth and potential deflation – namely cutting interest rates. given the increasing influence of external factors on global inflation dynamics,

savenaca narube : productivity and ethics opening address by mr savenaca narube, governor of the reserve bank of fiji, at the rotaract club of suva ’ s business seminar, suva, 28 february 2009. * * * introduction ms roshika deo, immediate past president of the rotaract club of suva members of the rotaract club ladies and gentlemen good morning and a very warm welcome to everyone. this is the second time that i have addressed your rotaract club early on a saturday morning! the first was in september 2007. a lot has happened since then in fiji and the world. back then everyone thought that the sub prime problem was virtually over perhaps with a short tail. how very wrong we were. as you know, the crisis has deepened and widened beyond anyone ’ s imagination. what is happening around us is unprecedented. while fiji is isolated from the financial mess, we unfortunately cannot avoid its economic fallouts. then the heavens opened up last month and flooded most of fiji. the impact is widespread and devastating. there is a lot of rehabilitation work to complete to rebuild livelihoods, businesses and industries. these two events have significantly effected our livelihood and we must do all we can to address them. if ever a time that the country needs to work together to build our economy this is one of them. the economy is our bread and butter. it is our livelihood. it puts food on the table. it pays for our children ’ s education. it protects the future of our grandchildren. so we should all play a part in building this economy right now. we should avoid the blame game. we should focus all our energy in getting things done in a coherent and consistent fashion. productivity if i may then ask, “ what is the role of rotaract in economic building, and perhaps on a wider scale, in nation building? ” how are you going about executing this role? productivity is an obvious way that your organisation can help lift the economy. i have talked at many productivity conferences. i have always emphasised that one of the easiest way to grow the economy is to raise productivity. fiji ’ s rate of productivity growth is extremely disappointing. my estimate is that if we raise productivity growth by 1 percentage point it will raise gdp by at nearly twice that. i ’ m very pleased that productivity is a theme of your seminar today. productivity is first a way of thinking and second a mechanical process. you can have