world electronically. in these areas, i am, glad to say that westpac has been at the forefront of bringing them to fiji. on the industry wide front, the reserve bank has recently launched fijiclear which is a real time automated payment system. this would improve efficiency in making and receiving payments. fijiclear also help safeguard financial stability. customers using fijiclear for payments will have their funds delivered the same day compared with 3 to 6 days required to clear cheques. i urge you all to use fijiclear and you can discuss this further with your commercial bank. on competition, this obviously is harder to measure. we can only look at the signs taking into account that our market is relatively small. we now have stronger credit institutions which provide their own brand of credit. it is also interesting to see that that changes in interest rates by one bank leads to other banks doing the same thing. some financial institutions do not wish to compete on prices but on other things like services. customers are now able to compare fees and charges. i am therefore of the general view that the financial system has become more competitive in the last ten years. another issue that we keep a close eye on is the liquidity in the financial system. by liquidity we mean the amount of money that banks have which they have yet to lend out. this amount obviously fluctuates from day to day. we would not like to keep this too tight as that may adversely affect the bank ’ s individual operations. at this time, liquidity is at an all time high at over $ 300 million. we have deliberately allowed this to rise since we have a credit ceiling in place. but it is obviously too high and we would be reviewing this liquidity level when we review the credit ceiling early in the new year. when it comes to lending or deposits, interest rate is an important factor. with the high liquidity that we have, interest rates have come down. they are now back at the same level they were in 2005 and in some cases ; the rates are lower than in 2005. and i wish to acknowledge that on several occasions westpac was the first commercial bank to reduce their lending rates. we do not see any upward pressure on interest rates in the foreseeable future. we are also interested in the products that the banks introduce into the market. here we see that there have been some very good developments in fiji. deposits as well loan products have increased to cater for the diversified needs of

##arching forces that led up to and characterized the recent spate of events, the specific responses of central banks and some challenges that are likely to face them as the future unfolds. i. what is going on? perhaps the most defining feature of the global economy over the last three decades has been what has been termed as the “ great moderation ” – the sustained decline in inflation and in inflation volatility. a comparison of the period since the asian financial crisis i. e., 19982007 and the 30 years preceding the crisis ( 1970 - 97 ) shows that in the recent period, inflation ( cpi ) in advanced economies has averaged 1. 9 per cent, down from 5. 8 per cent in the earlier period. over the same period, inflation in developing economies declined from 31. 0 per cent to 7. 0 per cent. over the same time span, inflation volatility measured in terms of coefficient of variation has fallen from 0. 55 to 0. 20 in advanced economies and from 0. 54 to 0. 32 in developing economies. consequently, average nominal interest rates ( libor rates on the us dollar ) have also moderated from 8. 3 per cent in the previous period to 3. 8 per cent in the recent period. this feature has also been reflected in some decline in real interest rates as well, from 2. 5 per cent to 1. 9 per cent. the secular lowering of nominal and real interest rates across the world has enhanced the appetite for risk even as pricing of risk has become increasingly difficult. the second important feature of recent global developments which could have had a direct bearing on the current crisis is the role of monetary policy. since the technology stocks meltdown in 2000, there has been significant monetary accommodation by the major economies – the us, euro area and japan – and it is estimated that between one - half and two - thirds of us currency supply is held outside the us. growth in monetary aggregates has been higher than the rates of growth that would have been expected hitherto in relation to real economic growth. yet inflation has been contained at low levels. there is evidence of abundant excess liquidity in financial markets which is also reflected in the macro imbalances between the us and asia. consequently, there have been sizeable currency misalignments and carry trades, compression of risk spreads, mispricing of widely diffused risks and even real sector implications for several emerging economies. the strong macroeconomic performance of asia has