life. we are assuming, for example, that consumer demand, and first home buyer demand for finance, will be softer in the second half of the year. nonetheless, the retreat from the extreme risk aversion of nine months ago, the partial recovery of household net worth and the impact of low interest rates will offer support to private demand over the period ahead. survey measures of business confidence have lifted from the very low levels seen at the beginning of the year to be close to their long run average. capacity utilisation has stopped its sharp decline. business credit has been falling, but this has been more than offset by increases in non intermediated sources of funding, such as equity raisings and corporate bond issuance. overall business external funding has remained positive, at rates similar to those seen in the 2001 slowdown. for their part, financial institutions remain profitable, even though they are absorbing higher loan impairments. business investment has been an area of expected weakness in forecasts for the australian economy. this is still likely to be true, though recent liaison suggests that some firms may be re - thinking the size of their planned cuts to investment spending. differences across sectors remain. the commercial property sector, for example, is part way through a difficult period of adjustment to valuation and leverage, even as parts of the mining sector are back to producing at full tilt to supply chinese demand for resources. the labour market has seen considerably softer conditions, but there has been little decline in overall employment, and the rise in unemployment, to date, looks smaller than had been feared a few months ago. as several commentators have pointed out, there has been a significant fall in hours worked, as there usually is in downturns. this may be a more reliable gauge of the extent of labour market weakening than employment or unemployment. compared with some earlier cycles, the reduction in hours has occurred via a reduction in working hours across more people, rather than being concentrated among a group of unemployed. at this point, the fall in hours worked looks larger than what occurred in 2001, but not as large as in 1991. in fact, that is probably a reasonable characterisation of this downturn in general. on the basis of the information to hand at present, this may well turn out to be one of the shallower recessions australia has experienced. inflation, meanwhile, has been easing. cpi inflation has recorded its lowest outcome in a decade, of 1½ per cent over the year to june. this compares with a

- principle agreement was reached to make the lines multilateral rather than bilateral, which would presumably make for more efficient activation in a crisis. ghosh, s. r. ( 2006 ), east asian finance : the road to robust markets, world bank, washington dc, p. 64. see asian development bank ( 2007 ), “ ten years after the crisis : the facts about investment and growth ”, in beyond the crisis : emerging trends and challenges, pp. 1 - 20. currently, the cmi involves a network of 17 bilateral swap arrangements, totalling us $ 83 billion. the swaps are all us - dollar based, except for swaps between japan - china, japan - korea and china - philippines, which are local - currency based. as a result of these developments, i imagine that today few countries in asia would, if they got into trouble, consider an early approach to the international financial institutions for assistance. but while the regional initiatives are all useful, they remain to be tested under less benign conditions in the global financial system. in fact, it is open to doubt whether they would necessarily prove sufficient as a defence mechanism, were really big changes in sentiment about the region to occur in international markets the way they did in 1997 - 98. if most countries in the region were under pressure at the same time, there would surely be questions as to whether regional counterparties could meet all the commitments for support. in any case, few financial crises are confined to one region : even those that start with a regional focus have a habit of spilling over quite quickly, as events after the asian crisis demonstrated. so while everyone has an interest in regional crises being effectively dealt with at the regional level, we surely still need global mechanisms for dealing with crises, and preventing them as far as possible. that prompts the obvious question : what has been done since the asian crisis to improve the global arrangements? what has been done internationally since the crisis? a good deal of effort has gone into crisis prevention. there has been a step - up in national and regional - level surveillance by the international official bodies, and an emphasis on more timely and accurate data being made available by governments. a stronger focus on financial sector soundness is another key element, with a number of countries undergoing financial sector assessment programs, in conjunction with the imf. these and other efforts represent serious attempts to use what was learned from the asian and other crises to reduce susceptibility, or at least to get an early