changed environment. some other industries are struggling with the high exchange rate. meanwhile certain service sectors are growing quite smartly. hence, while the economy overall has recorded “ average ” growth, few sectors are in fact experiencing “ average ” performance themselves – some are clearly quite weak relative to average, while some others are much stronger. the bank is quite aware of these differences and the pressures they bring to businesses and individuals. but we also know that monetary policy cannot remove the forces generating different paces of growth in our economy. we have to keep our eye on the overall performance of demand and prices. we are acutely conscious that history may offer limited bis central bankers ’ speeches guidance in assessing the net impact of the disparate and very powerful forces that are at work. nonetheless, that is the assessment we must try to make. our most recent assessment was that, with growth near trend, inflation consistent with the target, interest rates about average and an outlook suggesting more of the same, the setting of policy was about right for the moment. of course, we continue to reassess things each month. my colleagues and i are here to respond to your questions. bis central bankers ’ speeches

##f to be over 4 per cent this year, not very different from last year. again, we do not, at this point, see the signs of the rapid collapse in global demand we saw three years ago. at home, most of the information coming in suggests the economy has grown at close to an average pace over the past year. this outcome was weaker than we had expected a year ago. it was partly due to the effects of flooding on resource production but also due to softer outcomes in the non - resource side of the economy. cpi inflation has come down, as expected, as the impact of last summer ’ s floods on food prices reverse. in underlying terms, inflation was about 2½ per cent over 2011, also a slightly lower outcome than we had, at one point, thought might occur. the labour market was generally softer in 2011 after a year of unusual strength in 2010 ( though the unemployment rate at its latest reading was virtually unchanged from a year earlier ). these changes to the macroeconomic picture, against a backdrop of a period of intensified international turmoil, saw the board lower the cash rate by 50 basis points in the closing months of 2011. perhaps surprisingly in the face of developments in wholesale funding costs, this was initially fully reflected in a reduction in most lending rates, though there has been a partial reversal of that recently. we have repeatedly made clear that the shifting relationship between the cash rate and other rates in the economy is a factor the board takes into consideration in setting the cash rate. that will remain the case. recent developments do not materially affect the capacity of monetary policy to achieve its goals. looking ahead, the bank ’ s central expectation is for growth to be close to trend, and inflation close to the target, over the coming one to two years. there are, naturally, risks surrounding this central view. those are spelled out in the latest statement on monetary policy. perhaps what is most noteworthy about the australian economy is the way in which the drivers of growth have changed in recent times. the bank has spoken at length before about the terms of trade, and the resulting resource investment boom, which is still building and which will take the share of business investment in gdp to its highest level for 50 years. we have spoken also about how, on the other side, household behaviour has changed – people are saving more and borrowing less. spending is growing in line with income, but people are spending their money differently. the retail sector is finding it has to adapt to this