low and stable levels since the mid - 1990 ’ s. given the decreasing levels of inflation and inflationary expectations, the inflation premium included in nominal interest rates should have been reduced accordingly. nevertheless, slide 4 shows that this explanation does not suffice. real interest rates1 also show a declining trend, as represented here in the average real return on the 10 year bonds of g7 countries. what is behind this evolution? some attribute the low interest rate environment to a so - called savings glut. the crux of this argument is that there has been an excessive accumulation of global savings relative to the demand for fixed capital formation since the mid - 1990 ’ s. to quote federal reserve chairman ben bernanke “ … the very substantial shift in the current accounts of developing and emerging - market nations … transformed these countries from net borrowers on international capital markets to large net lenders. ” 2 indeed, it is interesting to observe that, in the late 1990 ’ s, in the aftermath of the asian crisis, several asian central banks started accumulating significant foreign exchange reserves in efforts to stabilize their capital flows and their exchange rates, or to be in position to do so, should that prove necessary in the future. meanwhile, some conjectured that mature economies with ageing populations would experience a peak in their savings rates. the “ savings glut ” hypothesis is contested, however. a first point of contention is that the impact of demographic change on savings and investments may be limited, compared to that of other factors. 3 indeed, the savings rates of industrialised countries did not appear to increase in this period ( slide 5 ). in some cases, they even decreased. a second discrepancy, asserted by john b. taylor and others, resides in the observation that the us savings gap, and the surge in savings in the rest of the world effectively cancelled one another out. 4 finally, despite the significant increase in savings rates in china and other emerging countries, there was no clear upward trend in global national savings. the stable output growth and historically low levels of inflation between the mid - 1980 ’ s and the onset of the financial crisis, a period often referred to as the “ great moderation ”, provides an alternative or complementary explanation for the downward trend in real rates. here, the real interest rates were calculated using the observed market nominal rate minus cpi inflation. bernanke ( 2005 ). cf. imf ( 2005 ). taylor ( 2009 ). cf

philip lowe : remarks - launch of asic's national financial capability strategy 2018 remarks by mr philip lowe, governor of the reserve bank of australia, at the breakfast event to launch asic's national financial capability strategy 2018, canberra, 21 august 2018. * * * i am very pleased to be here to participate in the launch of the national financial capability strategy. all of us have to make choices about money every day. do i spend, or save? if i spend, what do i buy and how do i pay for it? if i save, where should i invest ; how much risk should i take? if i borrow, how much should i borrow and how quickly should i pay it back? in many ways these choices have become more complicated over time. we have more options than ever before – which is good – but these options can be bewildering. it is fair to say that many people find it hard to navigate their way through the myriad of possibilities out there. but we all do need to find a way to navigate through these choices. we all need to plan. for our own sake, and that of our families, we need to do this as well as we can. if we go in the wrong direction, it can have a major effect on our families and our welfare, perhaps for years. so it is really important we make well - informed financial decisions. and, we can all do with a bit of help to make sure we are going in the right direction. the strategy that is being launched today can provide that help by providing education, information and support for australians as they manage and make decisions about their money, and plan and save for the future. i would like to congratulate the government and asic for the work they have done in putting this strategy together. at the reserve bank of australia, we are also trying to play our part. as australia ’ s central bank, the rba has a very strong interest in people being in control of their financial lives and making well - informed choices. i say this from the perspective of the individual and the economy as a whole. at the individual level, each of us will be better placed in our lives if we make good financial choices. and at the collective level, the financial choices that the 25 million of us make about how much we spend, save and borrow can have a major bearing on the health of the overall economy. if enough of us make risky or bad choices, the whole