crisis took place within the g10 ( e. g. the “ rey report ” ), but as g10 includes only one asian country ( japan ), the opportunity for interaction with this region was minimal. the australian treasury played a vital role in fashioning one piece of the new architecture - the still - pending new arrangements to borrow, the successor to the narrowly - based gab. for discussion of these regional arrangements, see grenville ( 1998c ). bibliography arndt, h. ( 1998 ), ‘ globalisation ’, australia - japan research centre pacific economic papers no. 275. australia, house of representatives ( 1998 ), parliamentary debates, 26 march, pp. 1172 - 1190. bhagwati, j. ( 1998 ), ‘ the capital myth : the difference between trade in widgets and dollars ’, foreign affairs, vol. 77, no. 3, may / june, pp. 7 - 12. camdessus, m. ( 1998 ), toward a new financial architecture for a globalized world, address at the royal institute for international affairs, london, 8 may ( http : / / www. imf. org ). dornbusch, r. ( 1985 ), ‘ over - borrowing : three case studies ’, in g. w. smith and j. t. cuddington ( eds ), international debt and the developing countries, the world bank, washington, dc. eichengreen, b. and a. k. rose ( 1998 ), ‘ staying afloat when the wind shifts : external factors and emerging - market banking crises ’, cepr discussion paper no. 1828. feldstein, m. s. and c. y. horioka ( 1980 ), ‘ domestic saving and international capital flows ’, economic journal, june, vol. 90, pp. 314 - 329. goldstein, m. and j. hawkins ( 1998 ), ‘ the origin of the asian financial turmoil ’, reserve bank of australia research discussion paper no. 9805. greenspan, a. ( 1998 ), statement of chairman of the board of governors of the federal reserve system before the committee on banking and financial services, us house of representatives, washington, dc, 30 january. grenville, s. a. ( 1997 ), ‘ asia and the financial sector ’, reserve bank of australia bulletin, december. grenville, s. a. ( 1998a ),

last year and are currently a bit above longer - run average levels. admittedly, households do not feel the same ebullience they did for some years prior to the financial crisis in the major countries. but that degree of confidence, with its associated patterns of saving and increasing leverage, was unusual, and is not likely to recur. our expectation is that consumer demand will record growth roughly in line with the trend rise in income over the period ahead. housing investment should strengthen given that several factors are supportive – interest rates are low, housing prices are tending to rise, gross rental yields have increased, population growth remains strong and is even picking up a little. admittedly, we are as yet very early in this phase. the increased capacity to extract and ship raw materials will see export volumes continue to strengthen, probably quite substantially, over the next couple of years. some other categories of exports seem to have stopped declining, notwithstanding that the exchange rate remains high. putting all that together, while growth was probably about trend in 2012 as a whole, our sense is that the economy has entered 2013 at a pace a little below that. we have been inclined to think that the near - term outlook could be for more of the same, but things are likely to strengthen further out. we are, of course, conscious that forecasts have a considerable margin of error. we have put some emphasis on this point in the way we present our forecasts in recent times. stepping back from the numbers, in broad terms, the economy will be adjusting to the peak of the mining boom and some other areas of demand will have room to grow more quickly than they have in recent years. this transition will not necessarily be seamless – these things seldom are – but there are reasonable prospects of it occurring over time. as we go through this period, the pressures to adapt business models, contain costs, increase productivity and innovate will remain. but such adjustments are actually positive for longer - run economic performance. inflation is currently consistent with the target. the high exchange rate has lowered prices for tradable goods and services and so helped to hold down measures of inflation over the past couple of years. but some domestic costs have also slowed, in response to softer demand conditions in some areas, even as prices for things such as utilities have risen sharply. the effect of the carbon price on the cpi so far has, as best we can judge, been broadly as expected. our assessment is that inflation will be consistent with