the orange line ) along with our estimates of how the participation rate would have evolved had the age structure of the population been constant over time ( the blue line ). given the ageing that is taking place, these data imply that the participation rates for the various age groups will need to continue to increase if the overall participation rate is to trend higher again. whether or not this happens will have an important bearing on the future growth rates of our economy. graph 6 australia is, of course, not unique in having to deal with the challenge of an ageing workforce. indeed, the changes taking place in a number of other advanced economies are much starker than those that are taking place here ( graph 7 ). our relatively high population growth, which includes a flow of relatively young immigrants, means that a number of countries in western europe as well as japan and south korea are further along in this journey than we are. from our perspective, this provides us with an opportunity to learn from their experiences. bis central bankers ’ speeches graph 7 so in summary : our population is growing rapidly, it is increasingly diverse and it is getting older. i will return to these themes in a few moments. but before i do that, i would now like to turn to the issue of productivity. productivity and innovation as i have spoken about before, australia faces a major challenge here. 2 looking back over the past two decades or so, we have enjoyed faster growth in real per capita income than almost any other advanced economy. in the 1990s, we benefited from strong productivity growth. then in the 2000s, our collective living standards were boosted by a very large rise in commodity prices. and over much of this period our national income was further increased by the rise in the labour force participation rate that i mentioned a moment ago. today things look a little different. productivity growth over the past decade has been lower than it was in the 1990s, commodity prices are high but no longer rising, and the share of the population in employment has fallen recently. if these trends continue we face the prospect of considerably slower growth in our living standards than we have become accustomed to. the solution here is to lift our productivity growth. again, australia is not the only country facing this challenge ; in almost all developed economies, productivity growth has been slower over the period since the mid 2000s than it was over the preceding decade ( graph 8 ). 3 there is much debate about why this is the case. one line of thought is that the slowdown is

at http : / / www. nber. org / papers / w18315. see phelps e ( 2013 ), mass flourishing : how grassroots innovation created jobs, challenge, and change, princeton university press, princeton. see mokyr j ( 2013 ), “ is technological progress a thing of the past? ”, eu - vox essay, 8 september. available at http : / / www. voxeu. org / article / technological - progress - thing - past. bis central bankers ’ speeches i don ’ t profess to know which of these views is correct – only time will tell. what underlies these debates though is that the ability of a society to innovate, to take and manage risks and to respond quickly to the changing world helps determine the rate of productivity growth. improvements in productivity require existing resources to be used more efficiently or advances in technology – they do not occur from doing the same thing over and over again without change. so if we are to improve efficiency and advance technology then innovation is required and innovation requires someone to take a risk – the risk of trying a different process, the risk of changing workplace organisation and management practices, or the risk of spending scarce resources to explore a new idea. sometimes the effort will not pay off, but just occasionally it will, and when it does, we find a better process, a more efficient organisational design or an idea that transforms how we do things. the point i want to emphasise here is that regardless of whether the techno - pessimists or the techno - optimists turn out to be correct, our attitudes to risk - taking, to innovation and to entrepreneurship have a significant influence on our future living standards. at this point, i would like to return to one of the questions i asked you to think about at the beginning : how has our society ’ s attitude to risk and innovation evolved over time and what are the implications for productivity growth? my own tentative answer is that there has been a subtle, but important, shift in the way we think about risk and innovation. in particular, our preferences appear to have shifted in such a way that we increasingly focus on risk mitigation and risk control. there are examples of this in a whole range of activities in our society – from the nature of the legislation that parliaments pass, to the increase in compliance activities in the nation ’ s boardrooms, to the amount of money we are prepared to spend to limit the probability of blackouts