to a competitor who has yet to reprice. in the online account world, the transactions costs of switching are very low, and the evidence is that the response rate to small interest rate differentials is rapid. while there may be more repricing to come, it is worth mentioning that as part of the basel iii liquidity standards, banks are required to demonstrate to apra that they have an appropriate liquidity transfer pricing model. apra is conducting a trial run of the new liquidity regime over the coming year and one might expect these new liquidity pricing models to come into effect as part of that. this will affect not just deposit pricing but pricing on the other side of the balance sheet, namely loans, as well. it will have a particular impact on contingent facilities such as lines of credit. to return to the issue of hqla for a minute. as most of you are aware, there is a shortage of hqla in australia. the stock of government debt on issue, both commonwealth and state, is well short of the liquidity needs of the banking system. hence, as part of the liquidity regime, the reserve bank will be offering banks access to a committed liquidity facility ( clf ). for a fee, the reserve bank will make available sufficient liquidity ( against eligible collateral ) to address the shortfall of hqla beyond the banking system ’ s holdings of commonwealth and state government debt. the motivation for doing so reflects the societal gains that i talked about earlier from the banking system engaging in an appropriate amount of maturity transformation. the pricing of the clf is aimed at replicating the cost of holding hqla in the form of government debt. that is, it is designed to be the same as the liquidity premium embedded in government paper. the fact that there is a cost to the banking system of holding hqla, either in the form of government debt or in the fee paid to have access to the clf, is in keeping with one of the main motivations of the basel iii liquidity regime, namely that banks engage in the appropriate amount of maturity transformation. generally speaking, liquidity was underpriced prior to 2007 with the result that excessive maturity transformation was undertaken, manifest in some cases in highly unstable short - term funding structures. the new liquidity regulation increases the cost of liquidity, but it is not designed to increase the cost so much that insufficient maturity transformation is undertaken from society ’ s point of view. having talked about liquid

of that suggests a significant structural rise in demand for energy and resources has occurred, as a result of the cumulative growth of the emerging world. this seems more likely to be a feature of the international economy for some time than to go away. if so, it has to be accommodated by the advanced industrial countries that, hitherto, have had access to those resources on favourable terms. such an accommodation can be made, over time, via responses to higher prices in terms of efficiency gains, structural change in economies and so on. but it is as well to recognise that an adjustment has to be made. this could well remain something of a medium - term challenge for economic policies in the relevant countries. the anika foundation was established in 2005 to raise funds for the purposes of supporting research into adolescent depression and suicide. for details, see http : / / www. anikafoundation. com. at a cyclical frequency, the global economic downturn has taken the pressure off prices for goods and services for the time being. most likely, inflation rates in the developed world will continue to be low for a while. some observers worry about deflation. for the past nine months or so, the key imperative has been to stabilise financial systems, and to support demand during a process of de - leveraging, so as to halt an incipient downward spiral of falling asset prices, contracting credit, slumping spending, further deflationary pressure on prices, and so on. probably in some of the most important countries, this support will need to remain in place for a while yet. once demand is on a self - sustaining path of expansion, the support can be removed. at a longer frequency, on the other hand, the aggressive, and in places unconventional, policy responses to the contraction in demand are seen by some observers as increasing the risk of inflation. the essential reasons for such concerns boil down to some fairly basic fiscal and monetary notions. fiscal deficits are very large in some countries now, and look like remaining so for some years. public debt is rising quickly in many countries. for the g7 countries, gross public debt will probably exceed 100 per cent of gdp within the next year. some major central banks have expanded their balance sheets dramatically, purchasing government debt and / or private securities in order to give additional impetus to efforts to support financial systems and aggregate demand. it is not that the fiscal burdens are unprecedented : there are periods in history in which deficits and