the pressure comes off the house - building sector. the continued modest growth in average wages to date also gives us some confidence. to the extent that there is an upward risk on inflation in the medium term, it is more likely to come from international developments as the world recovery gathers momentum. i will conclude by saying a few words about housing credit and house prices. as we said in our quarterly statement on monetary policy, “ the run - up in credit growth and the associated boom in house prices in recent years presented two implications for the economy : they tended to boost growth in the short term, but carried the risk of a damaging correction if they continued too long. ” in fact, they represented the one internal imbalance that could have put at risk the continuation of the long economic expansion that has been so beneficial to the australian community. it is not surprising, therefore, that we experienced a feeling of relief when data started to emerge this year which suggested the worst of the excesses may be past. first, we saw three monthly reductions in loan approvals starting in november 2003 which amounted to a cumulative fall of 20 per cent. approvals are now running at about $ 12 billion per month instead of $ 15 billion at their peak last year. it is still far too early to know whether lending is returning to a sustainable pace - certainly $ 12 billion per month is still far too high - but at least some progress has been made. certainly, the prospect of a return to sustainable rates of growth of credit seems brighter than for several years, and with it the increased likelihood that the run of good economic outcomes of the last decade will continue. more recently, we received very strong evidence that housing prices have not only slowed their rate of increase, but have fallen in level terms so far this year. this has occurred in most state capital cities, including the two largest, for australia on average, and for both houses and apartments. as the fall in prices becomes widely known, it should allow potential house purchasers to take their time and not be afraid, as so many were, that they had to rush in and buy for fear of missing their last opportunity. it should enable them to resist the blandishments of the banks, brokers and other commission agents plying them with offers of seemingly generous quantities of credit. it should also reinforce the recent tendency of investors to question their assumptions about easy capital gains. as such, we expect that the housing market will continue to go through a much - needed cooling phase

made to create incentives for firms to standardize over - the - counter derivative trades and to clear those trades through central counterparties. similarly, extensive work has been undertaken by the federal reserve and the major clearing banks to make the tri - party repo system more stable. money market mutual fund reform is also part of this ongoing effort. other initiatives are focused on reducing the financial stability consequences from the failure of a systemically important financial firm. the major initiative here is the single point of entry framework for resolution proposed by the federal deposit insurance corporation. under this framework, if a financial firm is to be resolved under title ii of the dodd - frank act, the fdic will place the top tier bank holding company into receivership and its assets will be transferred to a bridge holding company. the equity holders will be wiped out and sufficient long - term unsecured debt will be converted into equity in the new bridge company to cover any remaining losses and to ensure that the new entity is well capitalized and deemed creditworthy. subsidiaries would continue to operate, which should limit the incentives for customers to run. by assigning losses to shareholders and unsecured creditors of the holding company and transferring sound operating subsidiaries to a new solvent entity, such a “ top - down ” resolution strategy should ensure continuity with respect to any critical services performed by the firm ’ s subsidiaries and this should help limit the magnitude of any negative externalities. i very much endorse the fdic ’ s single point of entry framework for resolution. i think it is the best plan for implementing title ii given the complexity and scope of large, global financial institutions, and i also think it is well suited to the u. s. bank holding company framework. for this regime to work properly there needs to be a sufficient amount of debt outstanding at the parent company that can be converted by the fdic into equity to ensure that the new bridge company will be demonstrably well - capitalized. we don ’ t yet have a long - term debt requirement – this is an area where we are still working out the details. my own view is that a holding company needs a substantial amount of long - term debt to ensure that the newly created bridge company will be considered fully viable by its counterparties. while the title ii single - point - of - entry strategy holds tremendous promise, there are important implementation issues that still need to be worked out. implementing the resolution regime on a cross - border basis remains one of the most significant challenges.