this has been reflected in a decline, at the margin, in interest rates in australia, even though the reserve bank has not changed the cash rate for a year. australian governments have continued to borrow at or around the lowest rates since federation. similarly, funding costs for financial institutions have been declining. this, and an increase in competition to lend in an environment of still fairly moderate credit growth, has contributed to a reduction in the rates on housing and business loans. economic growth was, as recorded, clearly above trend in the march quarter. the quarterly result was, to a large extent, driven by a substantial increase in resource exports, as new mining capacity came on line and mining operations experienced fewer weather disruptions than usual. data for the june quarter suggest a “ payback ” of lower exports, and also a period of more subdued consumer demand. there are relatively few readings for the september quarter as yet, though at least some suggest that there may have been a reasonable start to bis central bankers ’ speeches the quarter. having printed lower for a few months, the rate of unemployment has recently been recorded at a higher level, though most leading indicators of the labour market seem to have improved a little this year. consumer prices rose by 3 per cent over the year to the june quarter, higher than the pace a year earlier. this partly reflects factors such as the increase in the tobacco excise but measures of underlying inflation also increased. a faster pace of increase in prices for tradable goods and services featured, a reflection of the depreciation of the exchange rate since april last year. the rate of inflation for “ non - tradables ” has actually declined over the past year, helped by growth of labour costs falling to its lowest rate for many years. there is some evidence that productivity performance may be starting to improve, though this is notoriously difficult to evaluate over periods less than several years. when we look ahead, a key feature of the outlook, as everyone knows, is that the capital expenditure phase of the “ mining boom ” is winding down, while the export phase is gearing up. the fall - off in investment spending by resources companies has a long way to go yet and will probably accelerate in the coming year. this impending further fall is captivating most of the commentators. meanwhile growth in non - mining activity has been increasing. a recovery in dwelling investment is well under way, with spending in this area rising by 8 per cent in the year to the march quarter. forward indicators

for non - mining business investment suggest a modest improvement over the coming year, though intentions have remained, to date, a bit tentative. consumer spending, though soft in mid year, could be expected to grow in line with income, or perhaps a little faster, given the rise in household net worth. but it seems unlikely that households will revert to their behaviour of a decade ago, when they were expanding their balance sheets quickly, saving much less of their incomes and increasing their consumption well ahead of the growth in incomes. public spending is scheduled to remain quite restrained. the overall growth rate of the economy is the sum of these various forces, and is also affected by factors not confined to the mining sector or even to australia. forecasting is an imprecise art at the best of times. at present, given the size of the mining boom, the extent of the shift in global relative prices over the past years, and the very unusual global economic and financial environment in which we still find ourselves, forecasts are likely to be even less reliable. with that caveat, my guess is that over the year ahead the growth of real gdp will be around 2 – 3 per cent : close to trend, but probably a bit below it in the near term. further ahead there are some reasons to think that growth could speed up somewhat and be a bit above trend. this outlook would mean that it will be a while before we see sustained reductions in the rate of unemployment. conditional on the usual set of assumptions about oil prices, the exchange rate and so on, inflation should be consistent with the 2 – 3 per cent target over the horizon relevant for monetary policy. the depreciation of the exchange rate last year is likely to continue to contribute to higher prices for tradable items for a while yet. but domestic inflation is likely to remain contained given how slowly labour costs have been rising. the removal of the price on carbon will lower inflation temporarily over the coming year. to say that growth is close to trend, but probably a bit below in the near term, will be disappointing to many people. and that is with very accommodative monetary policy – with the cash rate held at its lowest in 50 years for a year now and widely expected to be held at or close to these levels for some time yet. the low returns on offer on safe investments in australia, and the ultra - low returns on such assets internationally, are certainly having an effect by prompting investors to “ search for yield