on to consumers and lower prices are reflected in lower nominal salary settlements, then inflation could be structurally lower than it has been. this would give the monetary policy committee serious food for thought and in general would imply lower rates or at least a more gradual normalisation of interest rates. it could be a win - win - win scenario. if only we could dream! the south african economy is in a difficult space. we are negatively impacted by global developments, especially in europe and in china. combined with domestic concerns that i have outlined earlier, we do not anticipate robust economic growth or employment creation in the medium term. we hope we are wrong. it is possible for south africa to enter a virtuous cycle of rising confidence, rising investment and stronger growth fuelling employment gains ; bis central bankers ’ speeches leading to still higher levels of confidence. it will require strong leadership across the economy to create such a virtuous cycle. let me turn more directly to the challenges of collective bargaining. wage negotiations and the process of wage setting are important in the central bank ’ s thinking because wages are a key price in the economy. you would have often heard central bank governors decry periods when salary settlements are in excess of inflation and productivity growth. i would like to make clear what the bank ’ s thinking on this matter is. we are not opposed to workers receiving real salary increases. firstly, we feel that there should be an equitable sharing of productivity gains between workers and investors. an unequal sharing of such gains in either direction is unsustainable. secondly, there must, especially in the south african context, be an appropriate sharing of productivity gains between workers and senior managers. thirdly, productivity gains should be shared between existing workers and new additions to the workplace. if existing workers take all the productivity gains, then there is little scope to increase employment. the trend in recent years in south africa has been for workers to receive salary settlements in excess of inflation and productivity gains. firms respond to this situation by reducing staff numbers. this is clearly an unsustainable and undesirable development. the simple point that successive reserve bank governors are making is that in general, lower inflation enables larger real salary increases and higher productivity leads to higher incomes, higher investment and more employment. in conclusion ladies and gentlemen, i would like to leave you with a lesson from john nash, who won the nobel prize in economics for his work on game theory. his simple lesson is as follows : in

are working together to increase growth in output and employment and living standards on a sustainable basis. fifthly, there has in the past year or two been a perceptible improvement in international confidence in the south african story. the recent evidence of this can be seen in the upgrade in south africa ’ s international rating earlier this year by one of the major rating agencies, and in the decision by a leading international bank that it wishes to enter our domestic retail banking market as a full - service participant. stalking these big five and staying on track to keep them in sight has been a major effort and a considerable achievement in such a short period of years. nor are they the only objectives we as a society need to pursue. we cannot, of course, relax and we need to keep on track. as for the wild life in our national parks and game reserves, we need to keep the big economic five in sight and to nurture the right environment for them to flourish. in so doing we will, like any good game ranger, ensure that the benefits are sustainable and that they are enjoyed by the whole community.