malta fails to offer the right combination of productivity, skills, innovative ability and cost to justify their investment. there are other early warning signals. the economy ’ s 0. 2 % average real growth rate over the past two years is the lowest of all the acceding countries. it is also low compared to that of the existing eu member states. the experience of those two years may well have been exceptional, but it nevertheless serves to remind us that the economy needs to grow consistently much faster if malta is to catch up with average eu per capita income levels within a reasonable period of time. i strongly believe that the factors making for high costs and weak growth rates should be addressed as a priority. as i have observed on other occasions, strategies to improve competitiveness in a globalising world can be devised. other countries have shown the way. what is needed is the political will and the effective collaboration of all the parties concerned. population ageing perhaps there exists no clearer example to illustrate the kind of challenge the country faces than the issue of population ageing. the impact of a rapidly ageing population in the context of a generous welfare system is inevitably a dramatic rise in spending on pensions and health care. expenditure on welfare, including on health, is already absorbing close to one - fifth of the economy ’ s annual income, or about lm300 million, and almost two - fifths of government revenue. retirement pensions alone account for more than one - fourth of this, and are the cost item which is likely to register the strongest growth in the years ahead. over the next twenty - five years it is expected that the number of workers supporting one pensioner will drop from the present 4 to just over 2, partly reflecting the fact that the proportion of pensionable age persons in the population will rise from 16. 7 % today to over 28 %. an ageing society will also further aggravate existing national saving and investment trends. the impact on private consumption and savings patterns is a result of the ‘ life cycle hypothesis ’, which holds that a rise in the proportion of the elderly in the population tends to be accompanied by a decline in national savings. indeed, the effect of population ageing on public finances is nothing but a reflection of a wider economic problem involving a reduced productive capacity. reforms to pre - empt this impact must, therefore, be implemented without delay. here again, malta need not re - invent the wheel. the world bank model involving funded pension schemes is being applied successfully

the theme of “ repairing the social and economic fabric ”. in recognition of the scale of the employment crisis and its impact on both social cohesion and longer term growth, several other global institutions and economists are focusing their attention on employment, seeking ways to tackle unemployment and underemployment. these discussions on employment occur in a global context where unemployment has increased sharply since the onset of the financial crisis. of great concern is the fact that the number of young people who are unemployed, and the length of time that people remain unemployed, are rising. south africa has had an unemployment crisis for the better part of three decades. a few years ago south africa was an outlier with an unemployment rate of around 25 percent. today there are several countries in the periphery of europe with unemployment rates at least as high as ours – not that this is any reason for complacency or comfort. the international labour organisation estimates that there are about 200 million unemployed people in the world today. this figure excludes the millions more who are either underemployed or are discouraged from seeking employment. the ilo estimates that the number of unemployed people in advanced economies is likely to remain above the precrisis level up to at least 2017, a full decade after the crisis first began. in south africa, total employment is still about 400 000 below the peak reached in in 2008. bis central bankers ’ speeches the unemployment crisis represents a massive waste of lives and resources. it has profound social implications and its effects will be with us for decades to come. economists refer to the term hysteresis, which in this context describes the loss of skills and productivity when a person has been out of the workforce for a long period of time, thereby lowering future potential growth. reducing unemployment on a sustainable basis is arguably the single most important economic objective at the present moment. in part, creating jobs is about raising the level of economic growth. however, it is also about addressing the structural factors that limit employment growth. my address today will try to give you a sense of how central banks think about employment and how they factor employment issues into their reaction function. i will also explore broader structural and cyclical factors relating to employment. before concluding, i will briefly make some observations about the future of work and the likely impact of technological change. the policies of central banks are not often associated directly with employment creation. however, monetary and financial sector policies have a role to play in at least two respects. firstly, the