a vulnerability, the rba commissioned a survey from the abs to measure this. the first of these surveys was in 2001, and we have continued to get the abs to repeat the survey every three years. these have shown a consistent picture of minimal foreign currency exposure, including in the most recent survey in 2017. a large share of australia's foreign assets are denominated in foreign currency ( 86 per cent, which declines to 63 per cent, taking account of australian investors hedging their foreign currency assets ). so, if you look at the balance sheet of the country as a whole, australia has a net foreign currency position. this is true on an unhedged and hedged basis ( graph 8 ). hence when the exchange rate depreciates, the value of net foreign liabilities actually declines rather than increase. asset https : / / www. rba. gov. au / speeches / 2019 / sp - dg - 2019 - 08 - 27. html 10 / 12 8 / 28 / 2019 a balance of payments | speeches | rba graph 8 to reiterate, this allows the exchange rate to play the important role of shock absorber to external shocks. the exchange rate's ability to do so is not compromised by australia's net foreign liability position. the fact that the liabilities are effectively denominated in australian dollars while the assets are in foreign currency does not impede the exchange rate adjustment. if anything, it actually helps the adjustment. this wouldn't be true if the debt were denominated in foreign currency. conclusion to conclude, australia's balance of payments and external accounts have undergone a significant transformation since the days of paul keating's banana republic comment. the transformation has been quite dramatic and often overlooked. i have highlighted some of the most noteworthy developments. the trade surplus is around its largest, and the current account its narrowest, as a share of gdp in many decades. on the capital account, the mirror image of the current account, there has been a significant change in both the composition of the capital flows and, as a result, the stock of foreign liabilities and assets. government debt now comprises a much larger share of debt liabilities and bank debt a smaller share. the maturity profile of that debt is much longer. on the asset side, the large increase in australian offshore equity investment, mostly through the superannuation sector, means the country as a whole has a net asset position in equities

pace over the next year or so. this view is broadly similar to that of the imf and other forecasters ( graph 2 ). graph 2 from australia ’ s perspective, this would represent a favourable outcome, resulting in commodity prices remaining at relatively high levels compared with earlier decades, even if, as we forecast, they decline somewhat from their current elevated levels. in the australian economy, growth is around trend and underlying inflation is in the target range. this is a comfortable position to be in, but the challenge is to keep the economy there over the next few years. the challenge will not be easy. first, the economy has been growing continuously for almost 20 years, having experienced only relatively mild downturns during that period, and is therefore approaching full capacity ; and second, the resources boom that began about 2005, and which abated for a time during the global financial crisis, is re - emerging, adding to the pressure on capacity. over the next couple of years, we expect economic growth in australia to pick up from its current rate of 3¼ per cent, to closer to 4 per cent. domestic spending is expected to drive this pick - up. over the past year, final demand grew by about 5 per cent, partly due to government spending ( graph 3 ). this is in the process of being scaled back, but indications are that private spending will pick up noticeably in the period ahead. this is especially the case for business investment. income growth will add to spending capacity ; over the past year, reflecting the rise in the terms of trade, nominal gdp in australia rose by 10 per cent. graph 3 if, as expected, growth in australia increases to an above - trend pace, it is likely that in due course underlying inflation will pick up from its current level of 2¾ per cent. we are currently forecasting it to rise to around 3 per cent by the first half of 2012 ( graph 4 ). graph 4 as you know, earlier this year the reserve bank board returned official interest rates to a level that is consistent with lending interest rates being close to their average levels. having done so, we have been comfortable to leave official interest rates unchanged in recent months. however, as noted in the statement issued after the board meeting earlier this week, if economic conditions evolve as currently expected, it will be likely that higher interest rates will be required at some point to ensure that inflation remains consistent with the medium - term target. overall financing activity i will turn now to financing