centralised? a very important one. a single monetary policy requires variation in other policies. it is of the utmost importance that national governments continue to implement fiscal policies that aim at a budgetary position close to balance or in surplus, as stipulated in the stability and growth pact. if governments achieve balanced budgets or surpluses in normal periods of the cycle, they create a safety margin, sufficient to allow the operation of automatic stabilisers in the event of fluctuations in growth without risking excessive deficits. moreover, sound government finances are important to strengthen the conditions for price stability and for the strong and sustainable growth necessary to support employment growth. structural policies are another key area where national flexibility is needed and a uniform approach would be fatal. many of the important challenges which the euro area countries currently face can only be addressed through national policies. this concerns in particular the high and persistent level of unemployment, which is rightly a source of deep concern. clearly, the approaches that are most likely to have a lasting effect are those that address the root cause of the problem, not the symptoms. the root causes of high and structural unemployment in the euro area are structural rigidities in labour markets as well as tax and public transfer policies. the situation in euro area labour markets differs considerably. national unemployment rates range from 2. 8 % in luxembourg and 3. 2 % in the netherlands to 15. 7 % in spain. some countries, particularly those with more flexible labour markets, more moderate wage increases and better tax and social security policies, have managed to avoid the trend of ever - rising unemployment. for example, the netherlands, ireland and portugal all currently show unemployment rates well below the euro area average. there are also examples of other countries with higher unemployment rates, such as spain, that have begun to take steps to reform their labour markets and are now beginning to see tangible results. we can also look at some of the non - participating eu member states, such as denmark and the united kingdom, to see that high unemployment can be reduced through structural reforms. there are many examples of what can be done. first, there are measures to ensure that low - productivity workers are not forced out of the labour market. to this end, the burden of taxes and non - wage labour costs could be reduced for low - paid workers. in addition, minimum wage schemes and wage agreements reached by collective bargaining need to take account of the need to preserve jobs for low - productivity workers by reducing labour costs. second, there are “ active

for capital spending outside mining would be part of a further strengthening of growth over time. some of the key ingredients for this are in place. to date, there are some promising signs of stronger intentions, but not so much in the way of convincing evidence of actual commitment yet. that ’ s often the way it is at this point of the cycle. firms wait for more evidence of stronger demand, but part of the stronger demand will come from them. with respect to consumer demand, i should complete the picture by showing an updated version of the relevant chart from last time. in brief, not much has changed. the ratio of debt to income remains close to where it has been for some time ( graph 6 ). it ’ s rising a little at present because income growth is a bit below trend. household consumption growth has picked up to a moderate pace and has actually run ahead of income over the past two years. given that household wealth has risen strongly over that period, and interest rates are low, a modest decline in the saving rate is perhaps not surprising and indeed we think it could decline a little further in the period ahead. 3 as i ’ ve argued in the past, however, we shouldn ’ t expect consumption to grow consistently and significantly faster than incomes like it did in the 1990s and early 2000s, given that the debt load is already substantial. graph 6 see kent, c ( 2014 ), “ the business cycle in australia ”, address to the australian business economists, sydney, 13 november. bis central bankers ’ speeches productivity and competency when last i was here there were early signs of a pick - up in productivity growth, after a number of years of much slower growth. the most recent data, as measured, confirm that labour productivity has now grown faster over the past three years than it did on average over most of the 2000s ( graph 7 ). this is observable across a wide range of industries outside of the utilities and mining sectors, where some unusual forces have been at work. graph 7 the standard caveats apply, of course, and it is too soon to draw strong conclusions. nonetheless, the evidence is at least consistent with the hypothesis that productivity growth is on a better track than it was. business models have been challenged by the substantial change occurring in the structure of the economy, itself a response to changes in relative prices, in technology, the high exchange rate and other forces. the good news is that businesses can respond to that, and they are doing so.