philip lowe : remarks on a panel at the australian national university's crawford australian leadership forum remarks by mr philip lowe, governor of the reserve bank of australia, on a panel at the australian national university's crawford australian leadership forum, canberra, 19 june 2017. * * * thank you for the invitation to be part of this panel at the crawford australian leadership forum. the central issue is : where does the future growth in the global and australian economy come from? there are four points that i would like to make. 1. for a while, growth can come from a cyclical upswing in the global economy. over 2017, the global economy has improved. it is not just a story in one or two countries, but one that is broad based. after nearly a decade, the healing process after the financial crisis is well advanced, although there is still plenty of scar tissue. the chinese economy has continued to grow, although there are some fault lines. and in europe, it has been a few years now since the underlying problems last erupted. globally, monetary policy remains accommodative, there has been a lot of financial system repair and fiscal policy is no longer contractionary. this is all helping. so we are in a better position than we have been for some time. to be clear, we are not talking about a boom and there are still plenty of risks out there. but globally things are better. animal spirits have been missing for quite a while and they might just be starting to come back. 2. at some point, the cyclical upswing will run its course. beyond that, much depends upon demographics and technology. here there are reasons for pessimism and for optimism. many developed economies, as well as china and korea, face big demographic challenges. populations are stagnant or declining. they are also ageing. older societies want to save, rather than invest, especially so when there will be fewer people tomorrow than there are today. and older societies are likely to be more risk averse. so this is a major issue. on technology, i am more optimistic. there are great advances being made in science : in the material sciences, in power generation and storage, in genetics and the health sciences, and in computing and artificial intelligence. it is hard to be sure how these will all play out, but advances in these areas open up possibilities that few of us can imagine. they can transform our economies and form the basis for a new wave of

gains in incomes, asset prices and accumulated savings during the pandemic. however, these sources of support are being eroded to some extent by high inflation, rising interest rates and falling housing prices, and this is expected to contribute to a slowing in consumption growth from early next year. graph 8 gdp growth year - ended % forecasts actual previous current - 5 - 10 % - 5 - 10 sources : abs ; rba demand for labour remains strong but employment growth has been modest recently, suggesting that limited spare capacity remains in the labour market. the unemployment rate is forecast to remain around 3½ per cent until mid - 2023 before rising to 4¼ per cent by the end of 2024 as economic growth slows ( graph 9 ). broader measures of labour underutilisation that include workers who are underemployed are also expected to remain around their lowest levels in many years in the near term. graph 9 unemployment rate % forecasts % actual current previous sources : abs ; rba it is worth emphasising the positives that strong labour market conditions will continue to deliver for australians. even with the modest increase in unemployment that we have forecast to occur as the economy slows, the unemployment rate will still be close to its lowest level in decades. a higher share of australians have a job than ever before. female labour force participation is near its record high and there are opportunities for young australians to gain employment. reviewing the forecasts before i talk about some of the uncertainties around the outlook, i want to take a few minutes to talk about how we review our forecasts. forecasting is difficult at the best of times. it is unlikely that gdp growth, unemployment or inflation will exactly match point forecasts. as the past few years demonstrates, however, it is more often a question of how wrong the forecasts will be. this could be because unforeseen shocks hit the economy or households and businesses behave differently to what we expected. so although we only publish updated forecasts once a quarter, we in fact keep a close eye on how our forecasts are going throughout the quarter by closely analysing the incoming data and information from our own business liaison to see if the economy is evolving as expected. we also review past forecast errors. each year, a review of the accuracy of the bank ’ s economic forecasts is presented to the board to assess what we have learned about the economy and our forecasting approach over the previous year. the annual review draws on a