represents irrational mispricing of risk or is, by itself, a cause of concern. issuance has picked up, but it is not especially high. moreover, measures of corporate indebtedness are generally not elevated ( graph 13 ). this has been helped by some deleveraging among resource companies, which have been able to reduce the extent of their debt. 12 13 / 15 bis central bankers'speeches still, it is possible that we could see a noticeable pick - up in financial market volatility, a sharp repricing of assets and, as a result, a tightening in financial conditions, including higher spreads for corporate issuers. the recent experience in us equity markets has been a stark reminder of that possibility. while us equity markets reacted sharply, and other equity markets around the world responded ( though generally to a somewhat lesser extent ), the knock - on effect to other markets was modest. in particular, spreads on corporate debt were little changed. my sense is that this limited response of spreads reflected at least two features of the bout of equity market volatility. first, the sharp response of the us equity market was driven, at least in part, by some sizeable positions that had been taken on the back of an expectation that volatility in that market would remain low. second, the equity market turbulence was triggered by a reassessment of the outlook for us inflation and monetary policy. in particular, there was evidence of stronger wages growth and a prospect of rising inflation. it would be appropriate and welcome in that case to see a tightening in financial conditions. if that were to be sustained, it would naturally be accompanied by a reduction in the search for yield and some increase in spreads, which would tend to weigh on issuance. while there ’ s nothing that guarantees that the path of adjustment will be smooth and pain free, the forces that might push the us economy in that direction are not unwelcome in of themselves. and while other advanced economies are further from that point, including in australia, the expectation is that these same forces will come into play as spare capacity is gradually eaten into and inflation rises. thank you for your attention. i look forward to answering questions you might have. 14 / 15 bis central bankers'speeches 1 an important aspect of that is default risk, which i suspect is the thing many people have in mind when i mention risk. however, these spreads will also incorporate liquidity premia – government bonds tend to be quite

would like, the adjustment to the decline in the terms of trade is well advanced, and nonmining activity is improving rather than deteriorating. if the latter trend continues, it is credible to think that we can achieve better output growth, particularly as we reach the later phases of the decline in mining investment. this is what is needed to bring down the unemployment rate. as always, global factors will be important and the international setting continues to be a rather complex one. since the last hearing, growth in the chinese economy has continued to moderate. growth in other parts of asia was also weaker around the middle of the year. reflecting these outcomes, forecasts for global growth over the period ahead are a little lower than they were six months ago. that was the backdrop for a period of volatility in some financial markets. the unwinding of an equity market bubble in china appears to have served as the proximate trigger for a revision of equity valuations around the world. risk appetite diminished somewhat and the currencies of many emerging market economies came under downward pressure. whether that financial volatility itself will serve further to dampen global growth prospects remains to be seen. sometimes such events portend a wider set of economic events, but just as often, they don ’ t. in the present instance, it is important to stress that long - term debt markets and core funding markets for financial institutions have not been impaired. these markets remain open and it is still the case that highly rated private borrowers and most sovereigns can borrow at remarkably low cost. things could change, but at present we do not see anything approaching the dislocation of funding channels seen in serious crises. to be sure, emerging market countries are under some pressure and some of them have specific problems that are being recognised by markets. at the same time, though, many emerging market countries have done quite a bit to improve their resilience over the years. it ’ s also worth noting that performance in the unites states continues to improve. everyone knows that, eventually, this will have to be reflected in less accommodative us monetary policy. some fretting about the first increase in us interest rates for nine years is to be expected, no matter how well telegraphed it has been. the more important factor, though, will be the pace of subsequent increases. the federal reserve has indicated this is expected to be very gradual, but of course that will depend on what happens with the us economy