not been needed. that is all i wish to say about oil prices, other than to add the caveat that i am only talking about the increases to date. obviously, if we enter a new round of similar increases, the situation would have to be reassessed. world interest rates it is well known that the world has recently gone through a phase of exceptionally low interest rates, but i am not sure that people appreciate how low they were by historical standards. in fact it is not much of an exaggeration to say that interest rates in mid 2003 were at their lowest level for a century. this was the time when official overnight rates – the ones set by central banks – were 1 per cent in the united states, 2 per cent in the euro area, and zero in japan. the only qualifications i have to make to my earlier generalisation is to concede that rates may have been slightly lower during the second world war in some countries such as the united states and united kingdom when quantity rationing was the norm, but they have not been lower in peace time. we can construct an indicator of world interest rates for a century or more using a weighted average of the rates for the united states, united kingdom, germany and japan. graph 1 shows the results for official overnight interest rates or their nearest equivalent since 1860. although the graph is dominated by the high interest rates during the great inflation of the 1970s, the readings for 2002 and 2003 are lower than any other time in this long span of years. 1 part of the explanation is that inflation was low, but it was only low compared to the post - war standard – it was not low compared to most of the period covered by the graph. in fact if we construct simple measures of real interest rates ( based on realised inflation rates ), they were also low by the standards of earlier low inflation periods. 2 in table 1, real interest rates in the first five years of this decade are lower than in any previous decade apart from those containing the two world wars and the 1970s. graph 1 the observation for 1923, the year of the weimar inflation in germany, had to be deleted because it did not fit on the scale. the problem with most measures of real interest rates is that they become negative during periods of unanticipated rises in inflation such as the 1970s. for this reason, meaningful comparisons of real interest rates ( using realised inflation rates ) should only be made for periods of low and stable inflation such as the present.

glenn stevens : america, australia, asia and the world economy address by mr glenn stevens, governor of the reserve bank of australia, to the american australian association 2011 annual spring lecture lunch, new york, 14 april 2011. * * * thank you for the invitation to speak in new york. new york city remains one of the world ’ s dominant financial centres, on any metric. its stock exchange is by far the largest in the world in terms of market capitalisation. the us corporate debt market similarly eclipses that of other countries and the city is home to some of the world ’ s largest financial institutions. likewise, the united states remains the world ’ s largest national economy by a substantial margin. but the world is changing, and quite quickly. the rise of china ( and, very likely, india ) is a transformative event for the global economy. unless something pretty major goes wrong, we are likely to see much more of this trend for quite a long time yet. as recently as 1990, the united states accounted for a quarter of the world economy. the european union was just a little over a quarter. japan, east asia and india combined made up roughly another quarter ; japan on its own was about a tenth of global gdp. ( australia was then, and still is, just over 1 per cent of global gdp. ) in 2010, the us share was about 20 per cent of world gdp, about the same as the european union. by then, asia was making up just under a third of the total. china alone had raised its share of global gdp from less than 4 per cent in 1990 to over 13 per cent – quite a change in the space of 20 years. india ’ s share, which had been the same as china ’ s in 1990, had been little changed until about 2004. it has started to increase more noticeably since then, though it remains well below china ’ s at the moment. but given that the demographics for india are more favourable than those for china, we could expect that in another 20 years india ’ s prominence will have grown a great deal – assuming that country continues the process of reform that has helped it to generate impressive growth over recent years. these figures are all based on the imf ’ s purchasing power parity estimates for countries ’ respective gdps. some might find them a bit abstract – if you doubt that, try explaining purchasing power parity to your mother. but we can appeal to various other “ real ” indicators to chart the