. some that experienced considerable turbulence in the middle of last year, when tapering was first mooted, have seen less of that recently. this owes something at least to policy responses in those countries in the intervening period. among those countries that have been under most pressure of late, genuine domestic sources of risk can be observed in most instances. in several cases the market pressure has resulted in policy responses, which were perhaps needed anyway. in general then, tapering is proceeding, so far, about as well as can be expected. in the meantime, forecasts for the global economy haven ’ t changed much in recent months. if anything they have inched higher. they suggest that 2014 growth will be higher than in 2013, and at about average pace. more of the growth is coming from the advanced countries, and proportionately not quite so much from the emerging ones. that, too, is bis central bankers ’ speeches probably a welcome re - balancing in some respects after the weakness of the advanced countries in recent years. australia ’ s terms of trade have been little changed over the past year, though we still assume they will decline further in the future. turning to the australian economy, for some time our view has been that growth has been running below its trend pace. the national accounts released a couple of days ago don ’ t significantly change that assessment. for the year to the december quarter of 2013, real gdp rose by about 2¾ per cent. this is roughly in line with the forecasts we have had for a while. the drivers of growth are shifting. as we have been saying for some time now, and as confirmed in the recent survey of capital expenditure intentions by firms, the very high level of investment spending by mining companies has turned down, and the decline will accelerate over the coming year. other areas of demand will provide at least some offset. export volumes for resources are growing strongly, as the capacity that has been put in place by the high levels of investment comes on line. for example, iron ore shipments have risen by about 85 per cent from their levels of five years ago, to around 1. 5 million tonnes per day. they will rise further over the coming year or two. it is clear that dwelling investment activity will rise strongly over the period ahead. over the past three months, approvals to build private dwellings numbered almost 50, 000. that is an increase of about 27 per cent from the figures of a year earlier, and is the highest threemonth total in

raised pertaining to these requirements revolve around the calibration of the ratios, rather than the conceptual basis of the framework. it is important to emphasise the goal in establishing the liquidity framework : to require banks to withstand more severe shocks than they had been able to in the past, thus reducing the need for such massive public sector liquidity support in future episodes of stress. the success of the framework should not be measured in terms of whether it will have zero cost. instead, the better measure of success is whether the framework corrects pre - crisis extremes at acceptable costs. banks that take on excessive liquidity risk should be penalised under the new framework, while sound business models should continue to thrive. with these objectives in mind, the committee will use the observation period to review the implications of the standards – all the more as they are brand new – for individual banks, the banking sector, and financial markets, addressing any unintended consequences as necessary. bis central bankers ’ speeches in this regard, the basel committee ’ s focus is now on ensuring that the calibration of the framework is appropriate. certain aspects of the calibration will be examined and this will involve regular data collection from banks. any adjustments should be based on additional information and rigorous analyses. however, banks ’ data on the crisis are distorted because of the government support schemes. hence, the analysis will need to include both quantitative bank experience and additional qualitative judgement. it is worth emphasising that a number of effects of the framework are indeed intended. for example, with regard to the pool of liquid assets, the rules are meant to promote changes in behaviour and to create incentives to reduce risky liquidity profiles. this can be done, for example, by pushing out the average term of funding or increasing the share of stable funds. in other cases, banks did not price liquidity appropriately throughout the firm, and correcting risk management deficiencies will in turn improve liquidity profiles. in fact, the initial response we have observed in some countries that have already implemented comparable liquidity ratios suggest that these are the types of strategies that are being pursued. effects of basel iii on financial markets since the new regulation will change the behaviour of banks, it will also have wider effects on financial markets. the effects in the transitional phase will be different from the effects in the new steady state. in the transitional phase, adjustments of banks ’ balance sheets to meet the new capital and liquidity standards will affect supply and demand in