always agree with the reserve bank ’ s hard line approach on financial disciplines, but who always remain loyal to their central bank. it did not go unnoticed in the world financial markets over this past year, with major global financial market disruption, that the south african banking sector remained stable and sound. i give the credit for this to you, the managers of sound and well - disciplined private sector institutions. finally, talking about the people of central banking, i must thank my wife, my four children together with their spouses for their support over many years. i like to refer to the husband and wives of my children as my children who became my children because of the decisions of my children. my wife seldom had a normal husband, my children must on many an occasion have missed a normal father in the house because they had to contend with a husband and a father addicted to central banking. my peers as central bank governors will know what these words mean. 4. the future of central banking looking ahead, i can only express my regrets that i were not as of today ten years younger. exciting times lie ahead for the central bankers of the world as the process of the integration of financial markets around the globe will continue. however, i leave the south african reserve bank in great peace of mind because i am confident that mr tito mboweni and the team with him in the bank have the ability, the determination and the will to steer south africa successfully into this brave new world. tito, i admire the way in which you approached the past year of induction with us in the reserve bank. you succeeded in getting the staff of the bank on your side. you grasped very quickly what many outsiders will always regard as the mystique of central banking. you have truly become one of the members of the exclusive club of central bankers of the world. i leave the bank with great confidence that you will be the governor that will finally destroy the african jackal of inflation in our country. i wish you well. 5. conclusion one day, shortly after lunch, as i was sitting in the governor ’ s office on the 32nd floor of the reserve bank head quarters building in pretoria, the sliding door to the balcony in front of the office was standing open. i heard a noise and there came a bird almost falling out of the air as if it was shot. i walked out and found a beautiful homing pigeon lying on the floor of the balcony as if it was dead. i carried on with my duties behind my

the deterioration in inflation expectations was also reflected in the increase in the breakeven inflation rates, measured by the spreads between the yields on south african cpi inflation - linked bonds and conventional nominal bonds of the same maturity. if the deterioration in inflation expectations were to continue, it would be a cause for concern given the critical role of expectations in the price and wage formation process. the economy has continued to grow at a robust pace, with quarter - on - quarter annualised real gdp growth accelerating from 3, 5 per cent in the first quarter of 2005 to 4, 8 per cent in the second quarter. this acceleration was attributed in part to the strong increase in the real value added by the manufacturing sector, which appears to have recovered from the contraction in the first quarter. the utilisation of production capacity in manufacturing, having fallen back in the previous two quarters, picked up again in the second quarter of 2005. the physical volume of manufacturing production continued on an upward trend in the third quarter and the most recent value of the investec / ber purchasing manager's index ( pmi ) also indicates that the recovery in this sector has continued, although at a more moderate pace. most other sectors have also remained buoyant and the composite leading business cycle indicator shows a favourable growth outlook. this positive growth performance had a positive effect on employment. according to the quarterly employment statistics survey, formal non - agricultural employment increased at an annualised quarteron - quarter rate of 7, 6 per cent in the second quarter of this year. over the past year this reflects an increase of 84, 000 employees. domestic demand shows few signs of significant moderation and all components of final demand grew at a healthy rate in the second quarter. new motor vehicle sales reached new record highs in september, although there was a moderate slowdown in the growth of motor vehicle sales which increased by 25, 3 per cent over the year. the strong domestic demand has been underpinned by low nominal interest rates, higher real incomes and increases in asset prices. share prices on the jse limited, for example, reached new record highs, and since the previous mpc meeting the all - share price index increased by 4 per cent. the vigorous demand was financed in part by increased borrowing, and the household debt ratio continued to rise in the second quarter. household debt as a percentage of disposable income rose from 60 per cent in the first quarter to 62 per cent in the second quarter of 2005. however, because of