to sustain one even when government debt was running down ( e. g. australia ). in the east asian region outside japan, the local currency bond markets collectively are thought to be about us $ 1. 1 trillion in terms of total stock outstanding, up from around us $ 350 billion a decade or so ago. that is a sizeable sum, but of course it is dispersed around a number of countries in what are essentially a series of local markets. some countries in the region have first - rate financial infrastructure - legal and regulatory frameworks, trading platforms, clearing and settlement systems, and taxation arrangements. other countries need, in the opinion of expert observers, more work to lift the quality of their infrastructure. moreover, to develop a genuine regional market, in which savers and investors in the region can transact on a common set of arrangements, requires attention to harmonisation of many of these aspects of financial infrastructure. all of this is worth doing. the potential financing needs of some of the middle - income but fast - growing economies like china are very large indeed. to that could be added, if we shift our gaze a bit further west, the large and growing economic size of india. hence there is likely to be significant pay - off to efforts to develop better functioning markets. a question which arises at this point is whether the priority should be at regional level, in efforts to develop a regional, cross - border market, or at the level of individual countries, developing their own markets. efforts on both fronts are surely needed. a regional market would offer some efficiencies and enhancements to issuers and investors, but would have to be underpinned by the individual country components. it is in each country ’ s own interest to improve the functioning of their own market in any event. so the case for local initiatives is clear. but the push to take part in a regional project may well create the sort of dynamic which is helpful in overcoming obstacles at the national level, and the collective and individual outcomes will be stronger the more effectively market practices, and regulatory and legal issues can be harmonised at a ‘ best practice ’ standard. hence, done with good sense, it seems to me that local and regional efforts should be able to be consistent and mutually reinforcing. co - operative efforts have been initiated by various groupings to try to identify, and hopefully remove, the various structural impediments and to put in place some things which might accelerate market development. work under

as our benchmark, consumers do look to be cautious ; consumption growth is slower than it was previously ; the saving rate is higher ; and credit growth is lower. but are these earlier years the most suitable benchmark? i suspect they are not. over the past couple of years, consumption has been growing broadly in line with income. that does not look to be particularly cautious, although it is different. growth in household borrowing has also been broadly in line with household income. again, this does not look to be particularly cautious, but it is different. it may be more appropriate to describe this type of behaviour as “ prudent ”, rather than “ cautious ”. indeed, it might be described as “ normal ”. the general point here is that there is a recalibration going on regarding what is considered normal. having consumption, credit and asset prices grow broadly in line with incomes should probably be viewed as usual, typical or expected. so too should the rate of increase in our living standards being determined by productivity growth. i want to make it clear that i am not saying that we have to accept inferior economic outcomes from those that we have had on average over the past 20 years. indeed, australia is very well placed to continue to benefit from the growth of asia and we have many advantages, including our skilled workforce. but, on the financial side, we are unlikely to repeat this previous experience, and nor should we aspire to. there was an adjustment to take place and that adjustment has occurred. whether we can take advantage of the opportunities that lie ahead and continue to enjoy the rate of increase in our living standards that we have become used to depends upon productivity growth. the contribution the the effect of the large increase in the terms of trade is discussed in more detail in stevens g ( 2012 ), “ producing prosperity ”, address to the committee for economic development of australia ( ceda ) annual dinner, melbourne, 20 november. bis central bankers ’ speeches reserve bank can make here is to maintain low and stable inflation and to keep the economy on an even keel. beyond that, it is in the hands of businesses, workers and governments to deliver the type of changes that will drive the next round of productivity improvements. as a number of people have noted recently, this needs to be high on our national agenda. monetary policy i would now like to talk about the concept of normal as it applies to four issues related to monetary policy. the first of these is inflation. the key