the schedule in their debt contracts. despite the lowest interest rates that any current borrower has ever seen, the pace of lending to households remains moderate. this is not a credit crunch – lenders are willing to lend and competition to do so is strong. indeed, the prudential supervisor has been minded recently to issue some timely warnings about the need to maintain sound lending standards. rather, the story is that households are being more prudent about debt and are holding more liquid assets. one measure of this is the size of “ offset account ” balances – bank deposits held to offset mortgage debt. these now amount to about $ 90 billion. when the housing credit data are adjusted for the increase in offset account balances, the rate of growth over the past year is put at about 6 per cent, as opposed to over 7 per cent as published. this may mean that the effect of easy monetary policy is to be somewhat lessened, at least for a time. taking a medium - term perspective, though, the general strengthening of the balance sheet among many formerly more - indebted households has to be seen as a good thing. in the interim, the somewhat more restrained attitude to debt and spending by households, combined with a similar attitude by the government sector, has meant that there has not been quite enough domestic demand to achieve full employment, in the face of the fall in business investment. that is why we have felt that, on balance, a somewhat lower exchange rate was likely to be a part of the necessary adjustment. that adjustment seems to be occurring, with relatively little disruption, and is having an expansionary effect. growth in services trade for example is picking up. the “ net export contribution ” of services trade over the past year, of around ½ percentage point of gdp, is about the same as the contribution from iron ore exports over that period. it is worth noting that business conditions as measured in surveys have tended to improve overall, outside the mining sector, over the past year or so. at the same time, the state of the labour market, while still somewhat subdued, appears to be better than we had expected three or six months ago. employment growth has picked up noticeably, and hours worked have also increased. the rate of unemployment is unchanged from a year ago, whereas we had been thinking it might be a little higher than this by now, since growth in real gdp has been, according to the available statistics, below trend. candidate explanations for this better - than

against the unexpected makes a lot of sense. we all need to prepare for that rainy day. it rarely makes sense to take all the credit that you are offered, whether on a credit card or when you apply for a loan. many australians with mortgages find the best way of building buffers is to put any spare money into their offset account. this makes a lot of sense. my fourth and final point is to shop around and don ’ t be shy to ask for a better deal ; whether for your mortgage, your electricity contract or your phone plan. there are very good deals out there if you look. we can all play a role in making our markets more competitive by being smart and informed in our choices. again, i am pleased to be here at the launch of this important strategy. congratulations to those who have worked so hard to put it together. thank you. 2 / 2 bis central bankers'speeches