is distributed to shareholders or retained. while a significant proportion of the earnings distributed goes offshore, local shareholders also benefit. in fact, most of us are shareholders in the mining industry through our superannuation bis central bankers ’ speeches schemes. 2 we don ’ t get this income directly to spend now – it is in our superannuation. nonetheless, it is genuine income and a genuine increase in wealth. a good proportion of the earnings retained by companies is used to fund a further build up of physical investment, which imparts demand to construction and manufacturing. based on the industry liaison the bank has done, around half – give or take – of the demand generated by these projects is typically filled locally, though, of course, this amount varies with the nature and details of any specific project. so there are effects that spill over, even though it is not always easy to spot them. in the end the combination of the resources sector strength and all the other factors at work in the economy has, to date, produced a national rate of unemployment of around 5 per cent, and in queensland only a bit over 5 per cent. there are regional variations in unemployment rates, but at this point these look comparable to what has been seen at most times in the past 10 years – a period that has seen both lower average unemployment rates and lower variation in unemployment rates than the preceding decade. secondly, some of the undoubted differences in performance observable at present look like the inverse of earlier differences. take housing prices and population growth, which are of course quite closely related. it surely is no coincidence that the two state capitals that have had the clearest evidence of declining house prices over the past couple of years – brisbane and perth – are the two that previously had the highest rate of population growth and that have since had the biggest decline in population growth. moreover, it is hard to avoid the conclusion that changes in relative housing costs between states, while certainly not the only factor at work, have played an important role. relative costs are affected by interstate population flows, but those costs then in turn have a feed - back effect on population flows. this is particularly so for queensland. historically, queensland has had faster population growth than the southern states, as it has seen a slightly higher natural increase, a rate of net international migration on par with other states and a very substantial net positive flow of interstate migrants. net interstate migration to queensland peaked around 2003 – not long after sydney dwelling prices had reached a new high

good deal smaller. but australia is a resource producer, so we have the advantage of being able to take part in the additional supply of things that are in strong demand. this helps our incomes. mining companies are doing their best to capitalise on the increase in demand, and the effects of this will flow through the economy, but other producers are also enjoying a boost to their income. rises in the global prices of rural commodities over the past couple of years have been sufficient to deliver higher prices to most farmers despite the appreciation of the australian dollar. as consumers, the rise in our currency means that we take some of that higher income in the form of greater command over tradeable goods and services. the foreign exchange market being what it is – namely an asset market – it has looked a long way forward into the resources boom and pushed up the currency quite quickly. this is having significant effects. while consumers do seem to be continuing their more cautious mindset overall, many seem over the past year to have had the confidence to leave the country to experience foreign travel at prices more attractive than any seen for a long time. australia ’ s tourism sector is feeling the resultant loss of business, particularly in queensland where the floods also had a separate impact on confidence. that latter effect will pass – queensland ’ s set of natural endowments that attract tourists remains in place. but the need to adapt to the high exchange rate may continue. for as well as conveying a rise in purchasing power to consumers, the high exchange rate is exerting a powerful force for structural change. i think we are seeing this in the retail sector. the rapid growth of internet commerce – from a very small base – has been the topic of considerable discussion. this was bound to happen anyway with technology. but with the higher australian dollar, the component of the retail “ product ” that is added in australia – the local distribution and retailing overheads that are required to provide the retail “ experience ” – has become both much more visible, and much higher relative to the production cost of the good itself. so the incentive for the consumer to avoid those overhead costs has increased quite noticeably. the retail sector is therefore under pressure to reduce those costs. these are just some of the structural adjustment forces at work. of course it is easy to talk about structural change in the abstract. it is another thing to cope with it in practice. there are no magic - pill solutions, nor are there any real alternatives to adjustment. what solutions bis central