switzerland, sweden and most asian countries — and, of course, australia — the euro area was the exception. the slowing us economy, and particularly the cutbacks in investment in computing and electronics, also has had an impact on exports from asia, with the result that aggregate east asian gdp growth in the final quarter of 2000 seems to have been about zero ( leaving aside the special case of china ). the euro area has been less affected, but there is evidence from the manufacturing sector and from business surveys that growth is edging down nevertheless. i turn now to the second factor, namely the weakness in the australian economy in the second half of 2000, and its flow - on effects to the first part of this year. as i have conceded before, we did not foresee the extent of this weakness, and i am not aware of anyone who did, although some probably got closer than us. if you had told me before the event that the fall in house - building, a sector which only accounts for 5 per cent of the economy, would be large enough to outweigh reasonable growth in the other 95 per cent of the economy, i would not have believed you. our analysis of other countries ’ gst experience had suggested a much smaller fall than actually occurred. i am not saying that the housing contraction was the only thing that happened to the economy ; other things have also clearly slowed. but it was the thing that turned a relatively unexceptional slowdown into a small contraction. of course, what we were witnessing was not the normal cyclical development of an economy, but the transitional effects of a once - in - a - generation structural change to the tax system. the fact that it led to a negative number for the change in gdp had a big effect on people ’ s confidence. we saw this most clearly in the reaction to the release of the december quarter national accounts in early march. the australian dollar lost 3 us cents over the next ten days to fall below 50 us cents for the first time. at about the same time, consumer confidence, which had until then held above its long - term average, fell sharply to well below that average. the reaction was so large that a number of commentators raised the possibility that the country could " talk itself into a recession ". i am pleased to say that the mood has improved somewhat since that time. there were some other signs of weakness during the second half of last year, such as the fall in business confidence. this was something

is an ex post measure of the real cash rate as i am using actual inflation rather than expected inflation. 8 the treasury has very similar estimates in the commonwealth budget. 9 the bank has noted on many occasions over the past decade that it has taken account of this widening in spreads in the setting of monetary policy. 10 adler g and co buitron ( 2017 ), ‘ tipping the scale? the workings of monetary policy through trade ’ imf working paper 17 / 142. available at < www. imf. org / ~ / media / files / publications / wp / 2017 / wp17142. ashx >. 11 ferrari m, j kearns and a schrimpf ( 2017 ), ‘ monetary policy ’ s rising fx impact in the era of ultra - low rates ’, bis working paper no 626, april. available at < www. bis. org / publ / work626. pdf >. 12 debelle g ( 2017 ), ‘ how i learned to stop worrying and love the basis ’, dinner address at the bis symposium : cip – rip? basel, 22 may. 13 the yen basis refers to the cost for a japanese investor of hedging a us dollar or australian dollar investment, say, back into yen. 14 rey h ( 2013 ), ‘ dilemma not trilemma : the global financial cycle and monetary policy independence ’, proceedings of a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, 23 – 24 august, pp 285 – 333. available at < www. kansascityfed. org / publicat / sympos / 2013 / 2013rey. pdf >. 15 see also obstfeld m and a taylor ( 2017 ), ‘ international monetary relations : taking finance seriously ’, nber working paper no 23440. available at < www. nber. org / papers / w23440 >. 11 / 11 bis central bankers'speeches