global economy to which our country is more favourably exposed than most. it presents opportunities and challenges. with a large boost to income, we need to think about the balance between saving and spending, because we do not know the permanent level of the terms of trade. i argue for erring on the side of saving for the time being, and i think this is by and large what is happening so far. with a large change in relative prices, we should also expect to see a good deal of structural change in the economy. a careful response to that prospect is also needed, and no doubt your conference will examine such issues over the day ahead. i wish you well in your deliberations. bis central bankers ’ speeches

this flexibility can be used in a way that does not prejudice the achievement of medium - term price stability. importantly, this flexibility can help reduce the amplitude of cycles in activity and employment. it can also have the benefit of reducing financial stability risks, especially if cutting interest rates in response to a positive supply shock and lower inflation encourages excessive borrowing and asset overvaluation. again, i want to make it clear that the central bank does not need a broad mandate to have this flexibility. it is possible that a central bank with only an inflation mandate would achieve the same results, especially if it has a flexible, rather than rigid, inflation target. the other topic of this session is the coordination arrangements with government. i have already spoken about the agreement on the inflation target, so i would like to touch on four other aspects of the relationship between the central bank and the government. first, the government appoints all the members of the reserve bank board ( which is the decision - making body for monetary policy ). the governor has a term of seven years and often serves a longer term. other board members are appointed for at least five years and often serve multiple terms. besides the governor and the deputy governor, all members of the board are external and are prominent members of the business, academic or policy communities. the secretary to the australian treasury ( who is the most senior public servant in the treasury department ) is also a full voting member of the board. the secretary participates as an economist in their own right, not as a representative of the government, but is able to share details of the government ’ s fiscal and other plans. the board is apolitical and there is not a tradition of board members stepping down following a change of government. board members ( including the governor ) can have their appointments terminated only if they : become permanently incapacitated ; become bankrupt ; miss too many meetings ; or fail to satisfy their obligations regarding the governance of a public sector entity. these termination provisions have never been used and are not a point of controversy. second, there is a frequent exchange of views between the governor and the treasurer. this exchange is mostly on an informal basis, as circumstances require. the treasurer does not attend meetings of the board, nor has the right to do so. the government and the opposition support the independence of the rba and when the government is asked about monetary policy, the typical response is that monetary policy is a matter for the independent reserve bank. third, the rba is the transaction