mr duisenberg reports on the current position and future prospects of the european system of central banks keynote address to the president of the european central bank, dr w. f. duisenberg, at a conference organised by the royal institute of international affairs on european economic and monetary union markets and politics under the euro in london on 27 / 11 / 98. introduction ladies and gentlemen, i should like to express my appreciation at being invited to deliver a speech at this conference organised by the royal institute of international affairs. it is a great pleasure for me to be here, in london, today. the topic i am going to address relates to the current position and the future prospects of the european system of central banks. i feel that this topic provides me with an opportunity to deal with the objective of the escb and its contribution to the other policies in the community. i will also briefly touch upon the decision - making in the escb, recall the main features of our monetary policy strategy and talk about our regard for openness and transparency. the final part of my talk will cover the views of the escb on recent economic developments and the future outlook for price stability in the euro area. independence, transparency and accountability in the maastricht treaty the escb has been given an independent status. the reason is that politicians all over the world have come round to the view that monetary policy decisions taken with too close a political involvement tend to take too short a time horizon into consideration. the consequence is that in the longer term such decisions do not support sustainable gains in employment and income, but only lead to higher inflation. this view is confirmed by a host of economic research. independence, however, requires a clear mandate. the escb has such a mandate. its primary objective is to maintain price stability. without prejudice to the objective of price stability the escb will support the general economic policies in the community. price stability is not an end in itself : it creates the conditions in which other, higher - order, objectives can be reached. in particular, i share the deep concerns about the unacceptably high level of unemployment in europe. the escb will do what it can to contribute to the solution of this problem. by maintaining price stability inflation expectations and interest rates can be kept at a low level. this creates a stability - oriented environment which fosters sustainable growth, a high level of employment, a fair society and better living standards. moreover, in specific circumstances, if production, inflation and

exchange rate, over the past two years the australian dollar has depreciated by around 20 per cent on a trade - weighted basis and by around 25 per cent against the us dollar. we are now starting to see signs that this depreciation is boosting activity in various parts of the economy. one of these is tourism, with exports of travel services rising again, as more people visit australia and spend more money here ( graph 4 ). 1 conversely, imports of travel services have declined as more australians holiday domestically. the lower exchange rate has also improved prospects in a number of other export - oriented industries, including some parts of manufacturing, agriculture and even mining. the second factor helping with the transition is modest wage growth. over the past couple of years, aggregate wage growth has slowed noticeably and it is now running at the slowest pace in many years ( graph 5 ). while this means that average living standards are not increasing at the rate they were during the investment boom, the slower growth in wages is helping to improve the competitiveness of the australian economy. lower wage growth, by supporting employment growth, is also helping to share the burden of adjustment across the broader community. in this context, it is notable that for the past nine months, employment growth has been strong enough to keep the unemployment rate broadly steady, even though gdp growth has been below average. the third factor assisting with the transition is the low level of interest rates. the effects are perhaps clearest in residential construction which increased by 8 per cent in 2014. and with building approvals continuing at very high levels over recent months, particularly for apartments, we can look forward to further increases in construction activity over the months ahead ( graph 6 ). low interest rates are also helping to boost household consumption. they are doing this by improving the aggregate cash flow of the household sector and boosting household wealth. however, as i have spoken about previously, the overall effect on consumption is probably smaller, or at least slower, than it was in the past. 2 this is because high debt levels mean that households are less inclined than they once were to respond to low interest rates by borrowing to increase their spending. notwithstanding this, there is still a spending response some of this rise is also related to a pick - up in education - related travel following changes to arrangements for student visas since 2012. see lowe p ( 2015 ), “ low inflation in a world of monetary stimulus ”, speech to the goldman sachs annual global macro economic conference,