. 1 in most countries, real output and income typically track one another quite closely and indeed this was the case for australia during the 1990s. but over the 2000s, our real income increased much more quickly than our output owing to the large increase in our terms of trade. we became much better off as a nation because the prices of the goods that we were selling to the rest of the world increased quicker than the prices of the goods that we were buying from the rest of the world. the measure of income used here is real net national disposable income ( rnndi ). it adjusts gross domestic product ( gdp ) to take account of changes in the prices of our exports relative to our imports ( the terms of trade effect ), real income flows between australia and the rest of the world, and depreciation of machinery, buildings and other produced capital. bis central bankers ’ speeches and, finally, the blue line shows real income, not per hour worked, but per person in australia. this is probably the best measure of how average living standards have progressed through time : it takes into account the lift in productivity, changes in the relative prices of our exports and imports, and changes in the share of the population that is in paid employment. it is the strongest of the three lines shown here. this reflects the fact that over the past two decades or so there has been a substantial increase in the share of the population in paid employment ; between 1993 and 2008, this share rose by 7 percentage points to over 50 per cent. this rise is accounted for by three trends : a decline in the unemployment rate, a rise in the participation rate and a decline in the share of children in the population ( graph 2 ). taking these two decades or so as a whole, australians have enjoyed very strong growth in average living standards. real income per capita is currently around 60 per cent higher than it was in the early 1990s, having grown at an average rate of around 2 per cent per year over this long period. in the 1990s, we benefited from strong productivity growth. in the 2000s, we benefited from the rising terms of trade. and across both decades we benefited from increasing labour force participation and favourable demographic trends. the story, over recent years, is a less positive one. while productivity growth has picked up a bit, the terms of trade have declined, as has the share of the population in employment. as a result, there has been very little growth in real income per capita since 2008

jean - claude trichet : interview with l ’ espresso an interview with mr jean - claude trichet, president of the european central bank, conducted by mr claudio lindner, published 15 september 2006. * * * mr trichet, let us begin our examination of europe with the message that the figures are giving us : are we in fact seeing a recovery? as early as the second half of 2005 our diagnosis was that the euro area was experiencing a gradual recovery and approaching the level of its growth potential. this diagnosis has now been confirmed by the very good data for the second quarter of 2006 which allow us to record good – and better than forecast – progress in the first half of this year. however, a word of caution : this does not mean that we are changing our diagnosis for trend growth. when we had a rather disappointing figure for growth in the fourth quarter of last year we said it did not change our sentiment that trend growth was around potential. i would say the same today after those flattering hard figures. we have to view everything from a medium - term perspective. and we should not discount the level of uncertainty that exists in the world today. not least because the united states, by contrast, seems to be experiencing a slowdown. what counts for us right now is the overall economic situation, on a global level, and therefore not just in the united states. the leading economic institutions and private research institutes state that we will probably continue to see a rather dynamic growth rate at a global level. however, you seem to be very concerned with inflation, to the point that many people are betting on a further rate rise before the end of the year, to 3. 5 %. the primary mandate assigned to us is to guarantee price stability, and we have to be credible in order to be able to anchor inflation expectations. this is extremely important not only for our credibility, but also because it enables a favourable level of medium and long term market interest rates to be maintained. i am convinced that this is also the sentiment of the 313 million european citizens ( 315 if we include the slovenians, who will be the next to join the euro area ), who are asking us to safeguard their purchasing power by maintaining price stability. therefore, this is not only what the treaty commands us to do but also what our european fellow citizens are emphatically asking us to do. could inflation trends lead you to adjust rates again? after our last meeting in frankfurt, i said, on behalf