strong economic conditions globally. looking beyond these financial events, the data we have received on the real economy over the summer have been consistent with our assessment that gdp growth will pick up over 2018. taken together, the recent domestic and global data on the real economy suggest that 2018 has started on a more positive note than did recent years. particularly noteworthy has been the labour market, with employment increasing by 3¼ per cent over the past year. this strong performance has been accompanied by a large number of people joining the workforce, so that the participation rate has returned to around the level reached at the peak of the mining investment boom. there have been noticeable increases in the participation rates of both women and older australians. at the same time, the unemployment rate has declined to around 5½ per cent and a further gradual decline is expected over the next couple of years. business conditions are around their highest level since before the global financial crisis and there has also been an improvement in business confidence. non - mining business investment has been stronger than we had expected a year ago and the investment outlook has brightened. one ongoing area of uncertainty, though, is consumer spending. household incomes are growing slowly and debt levels are high. i will return to these issues in a moment. on the prices front, we continue to experience subdued outcomes, although inflation is higher than it was a year ago. over 2017, inflation was a bit under 2 per cent, in both headline and underlying terms. last week ’ s data provided further confirmation of trends we have been witnessing for some time. increased competition in retailing is contributing to price declines for many consumer durables. and subdued wage increases are contributing to low rates of inflation for a range of market services. the rate of rent inflation also remains low. the immediate outlook is for a continuation of these broad trends, but for inflation to pick up gradually as the economy and labour market strengthen. we are expecting cpi inflation to be in the 2 to 2½ per cent range over the next couple of years. underlying inflation, which is less affected by the scheduled increases in tobacco excise, is expected to be a bit lower than cpi inflation. 2 / 5 bis central bankers'speeches i would now like to touch on a couple of issues that we are paying close attention to and that could have a significant bearing on the outlook for growth and inflation over the next couple of years. the first of these is wage growth. not only are most workers experiencing low wage increases, but following the resources boom some

hr intervention. the assessment of performance across a myriad of functions in banks also needs to be reviewed so as to result in employee motivation and thus, retention. it is but natural for banks to outsource their it related activities including application development when the sector as a whole, is facing a shortage of skilled professionals. however outsourcing brings in its wake, several risks. the failure of a service provider in providing a specified service, a breach in security / confidentiality, or non - compliance with legal and regulatory requirements by either the service provider or the outsourcing bank can lead to financial losses or loss of reputation for the bank and could also lead to systemic risks bis central bankers ’ speeches within the entire banking system in the country. it has happened in the past and it could happen in future too. it would therefore, be imperative for any bank outsourcing its activities to ensure effective management of these risks. how can these issues be effectively managed? can this be achieved by maintaining a subsidiary employing professionals with the requisite it skills and remuneration at par with their peers in the it industry so as to obviate the necessity of outsourcing. the challenge here is to provide the right remuneration and a career progression path for the recruited skilled talent. please remember these employees would not only be comparing themselves with their colleagues in the parent organisation but also their peers in the it industry and vice - versa. to keep them motivated is, therefore, not a small challenge. we could unanimously agree with n r narayana murthy who has once said, “ our assets walk out of the door each evening. we have to make sure that they come back the next morning ”. in other words, retaining talent is as important as identifying and recruiting them in the first place. concluding thoughts i have shared some of my thoughts on the sessions scheduled for the day. in the sixth edition of this conclave, i would like to leave you all with a few more questions with no definite answers, hoping that some views emerge during the course of the day. how can we work towards balancing customer ’ s comfort, convenience and security? studies have shown that customers acceptance of electronic banking depends on factors like convenience, experience, perceived accessibility, safety and security. despite measures taken by the banks and the industry as a whole, new means of perpetrating cyber frauds bypassing the security measures are emerging. we need to keep ahead of the fraudsters by investing and adopting technology. having