and eventual surplus over time, as required by the government ’ s medium - term fiscal commitment. on the monetary side, the inflation targeting framework the reserve bank has been following for a decade and a half will guide adjustments to interest rates. these will be timely and ahead of a build - up of imbalances that would occur if interest rates were kept low for too long. these frameworks will, in other words, prompt the needed adjustments. it was the preparedness to make those adjustments in the past, guided by these very frameworks, that contained the build - up of imbalances in the upswing and which in turn earned us the scope to take bold measures to support demand when a recession loomed. a continuation of that approach into the future will serve us well.

strength in demand for resources has kept australian exports expanding. australia ’ s terms of trade, even though well off their peak, remain high by historical standards. confidence about the future for the resources sector is building quite strongly. finally, australia had ample scope for macroeconomic policy action to support demand as global economic conditions rapidly deteriorated, and that scope was used. the commonwealth budget was in surplus and there was no debt, which meant expansionary fiscal policy measures could be afforded. in addition, monetary policy could be eased significantly, without taking interest rates to zero or engaging in the highly unconventional policies that have been necessary in some other countries. i have maintained throughout that australia ’ s medium - term prospects remained good and that we should not lose confidence. more people seem to be taking that same view. measures of business and household confidence have shown a very substantial pick - up from the low points reached earlier this year. share prices have risen by almost half. house prices have risen rather than fallen, though commercial property prices have fallen. people are realising that, though things have been tough, the worst has not occurred and the future is looking brighter. earlier plans for drastic cuts to capital spending look like they are being reconsidered. economic growth forecasts are being revised up. a straightforward reading of the economic outcomes would suggest that the various policy measures have been effective in supporting demand. in due course, both fiscal and monetary support will need to be unwound as private demand increases. in the case of the fiscal measures, this was built into their design. the peak effect of these measures on the rate of growth of demand has probably already passed. the extent of support will tend to tail off further over the next year. in the case of monetary policy, the bank has already signalled that interest rates can be expected, at some point, to move off their current unusually low levels, as recovery proceeds. these adjustments back towards more normal settings for both types of macroeconomic policy are what should be expected during the recovery phase of a business cycle. our most recently released set of forecasts assumes they occur. such an outcome would mean that fiscal and monetary policy would be acting broadly consistently, as they did when they were moved in the expansionary direction when the economy was slowing. in both cases a degree of policy discipline will be needed. policy frameworks will be valuable in enforcing that discipline. on the fiscal side, the forward estimates provide an indication of the restraint needed to move the budget back towards balance