in many decades, inflation was low and financial systems were stable ( graph 1 ). these are positive outcomes. we should not lose sight of this. graph 1 1 / 13 bis central bankers'speeches there was, though, a change in momentum in the global economy late in the year. this change was particularly evident in europe and it was also evident in china. it has been widely reported in the media, but it is important to keep things in perspective. some slowing in global growth was expected, given that labour markets are fairly tight and the policy tightening in the united states was aimed at achieving a more sustainable growth rate. so, i have been a little surprised at some of the reaction to the lowering of forecasts for global growth, which has been quite negative. we need to remember that the imf's central forecast is still for the global economy to expand by 3. 5 per cent in 2019 and by 3. 6 per cent in 2020 ( graph 2 ). if achieved, these would be reasonable outcomes and not too different from the recent past. graph 2 2 / 13 bis central bankers'speeches what is of more concern, though, is the accumulation of downside risks. many of these risks are related to political developments : the trade tensions between the united states and china ; the brexit issue ; the rise of populism globally ; and the reduced support from the united states for the liberal order that has supported the international system and contributed to a broad - based rise in living standards. one could add to this list the adjustments in china as the authorities rein in shadow financing. the origins of these diverse issues are complex, but there is a common economic element to some of them : that is, the extended period of little or no growth in real incomes for many people. in a number of countries, growth in real wages has been weak or negative for years. advances in technology and greater competition as a result of globalisation also mean that many people worry about their own future and that of their children. politicians, understandably, are responding to these concerns. time will tell, though, whether the various responses help or not. i suspect that some of them will not. over recent months, the accumulation of downside risks has been evident in business and consumer surveys. it was also evident in increased volatility in financial markets around the turn of the year, with declines in equity prices and an increase in credit spreads ( graph 3 ). since then, though, markets

the global slowing we have seen has, so far at least, been of the more ordinary variety. that is not to make light of these developments, only to keep them in some sort of perspective. the kind of growth envisaged for the world as a whole is close to its long - run average. of importance to australia, and as we noted at the february hearing, the chinese economy looks like it has slowed to a pace of growth that is likely to be more sustainable. this is, though, clearly below the pace seen for much of the recent past and the implications of this new pace of growth for the trajectory of demand for various commodities are still being worked through in the relevant markets. commodity prices have declined. australia ’ s terms of trade peaked about a year ago. however, they remain high in comparison with most of the past century. overall, the developments in key commodity prices do not seem out of line with what we can observe about the progress of the global economy. of late, financial market sentiment has again recovered somewhat. this is seen most clearly by share prices in most markets recovering the losses seen in mid - year, while interest rates on “ peripheral ” european debt have fallen. it could not be said that confidence is strong : uncertainty is high and much of this stems unavoidably from the situation in europe. european policymakers have continued their efforts both to stabilise the immediate situation, and to craft stronger pan - european structures for financial management so as to provide a more enduring stability. their actions and commitments to future actions have been bis central bankers ’ speeches important but expectations for further progress are high. realistically, it will be quite some time before the europeans will be able to say these problems have been put behind them, even if things go well. turning to the domestic economy, the sequence of changes in assessment has tended to be the obverse of what we have seen internationally. at the previous hearing we believed, on the basis of the available data, that overall growth had been close to trend over 2011. subsequently we could not avoid revising that view downwards a bit, as there seemed to be some emerging evidence that growth had been weaker than that. the most recent data, on the other hand, are suggestive that the earlier assessment may, in fact, have not been too far off the mark. as recorded, domestic final demand rose by 5 per cent in real terms over the year to the march quarter, even with a small contraction in public