2. 2 %. second, when looking forward from now until the early part of 2003, although recent developments in oil prices have lowered short - term price pressures, there are still some factors that could keep annual inflation rates above 2 % for several months to come. yet this short - term outlook is related both to base effects and to indirect taxes and administered prices, i. e. to temporary developments. third, when looking beyond the short term, we consider that both the overall economic environment and the euro exchange rate, which has strengthened since early this year, will contribute further towards reducing inflationary pressure. moreover, we expect the indirect effects of previous increases in oil prices and other factors to further unwind. although wage - related risks remain in place, they are judged less likely to materialise as long as the economic environment does not change substantially. the assessment which guided today's monetary policy decision was that, overall, the prospect has strengthened for inflation to fall below 2 % in the course of 2003 and to remain in line with price stability thereafter. our decision should also help to improve the outlook for the euro area economy by providing a counterweight to some of the existing downside risks to economic growth, thereby supporting confidence. the most likely scenario is that economic growth will gradually recover in the course of 2003 towards rates more in line with potential. falling inflation should support real disposable income and, together with a reduction in the gap between perceived and actual inflation rates, should underpin private consumption. moreover, we expect an improvement in world demand. this, and the low level of interest rates, should benefit investment. let me point out that, with today's decision, the key ecb interest rates have reached a very low level by historical standards. the governing council will continue to monitor closely all factors that may affect the prospects for inflation in the euro area. the outlook for the euro area economy will also very much depend on visible progress in other policy areas. regarding fiscal policies in the euro area, i would like to reiterate that budgetary discipline strengthens the conditions for sustainable growth of gdp and employment. therefore, sound fiscal positions, as enshrined in the treaty and further developed in the stability and growth pact, are in the interest of all the member states. given the disappointing fiscal developments in some countries and the challenges which have emerged to the eu fiscal framework, we welcome the moves to correct or prevent excessive deficits, i. e. the implementation of

workers could do this because of the nature of their work. of those that could, some firms were already well prepared for flexible working, but for many it was a huge shift. over time, though, people adapted. for some, working from home has been a struggle. but most businesses we speak to as part of our liaison program report that when they made the switch their operations continued reasonably effectively. a small number of firms even report that productivity rose. other firms adapted in how they dealt with their suppliers and customers. existing trends towards greater use of e - commerce and home delivery were greatly accelerated. another way people adapted was shifting the pattern of demand. around the world, restrictions on activity constrained services industries in particular. so consumer spending shifted away from services to goods, as the australian data clearly show ( graph 2 ). this went beyond the obvious substitutions, such as from restaurant meals to groceries to cook at home. sports equipment substituted for closed gyms, toys and games for organised children's activities. and with more time at home, people renovated, redecorated and kitted out home offices. graph 2 household consumption december 2019 = 100 index discretionary goods index ( 20 % ) essential services essential goods ( 44 % ) ( 16 % ) discretionary services ( 20 % ) m j s d m j s d m j s d m sources : abs ; rba as this switch in spending was a global phenomenon, it supported a swift recovery in global trade ; goods trade is now above pre - pandemic levels. strong demand for manufactured goods has been a positive for economies with large export sectors, including china and some economies in east asia. it has also increased demand for many commodities as well as for other components, such as semiconductors. this has boosted prices in many cases. overall, these price rises have tended to add to incomes in australia. the ratio of the prices of things we export to those of things we import – known as the terms of trade – is approaching the peak reached a decade ago, itself a 150 - year high. our inherent adaptability doesn't mean that all adjustments are smooth, though. this shift in demand has contributed to bottlenecks and delays throughout global supply chains ( graph 3 ). our liaison contacts and others in the business community have certainly seen the effects of this. shipping costs are up sharply, and so are some other costs ( graph 4 ). it is hard to know how long these disruptions will last.