targeted longerterm refinancing operations to channel credit to the economy. this joint effort was crucial to keep the economy afloat, especially while fiscal measures were still being rolled out. from march to may 2020, bank lending to companies in the euro area surged by nearly €250 billion, the largest jump we have ever seen in a threemonth period. we then faced a sequence of shocks which pushed inflation in the opposite direction. that led to the fastest monetary policy tightening in the euro area on record. we ended net asset purchases and increased rates by 450 basis points in little over a year. this sudden reversal could have severely stressed the european banking sector – just as we saw elsewhere in the world. indeed, research suggests that the transition from low to higher rates can negatively affect the banking system. 4 but european supervisors have worked diligently over the past few years to help banks realign their business models, which enabled them to face the rate reversal on a solid footing. in particular, when the ecb began normalising its monetary policy at the end of 2021, european supervision proactively prepared banks to face the risks arising from the new environment. 5 supervisors focused on banks'funding strategies and encouraged them to improve their management of interest rate risk. this included increased scrutiny of risks in banks'held - to - maturity portfolios and disclosure of their unrealised losses – which turned out to be significantly lower than the unrealised losses in other parts of the world. 6 in this way, european banking supervision has not only empowered our monetary policy response to the pandemic, but also facilitated our fight against inflation by readying banks for the new environment. the conclusion is clear : single supervision has complemented the single monetary policy – just as theory predicted it would. conclusion the 18th century english poet alexander pope said that " blessed is he who expects nothing, for he shall never be disappointed ". but a decade ago, as we emerged from the euro crisis, we did not have that luxury. we launched european banking supervision with high expectations – not only for it to be a strong supervisor, but an essential piece of a complete monetary union. and it has not disappointed. in fact, faced with severe tests that we could never have imagined at the time, it has exceeded most reasonable expectations. 3 / 4 bis - central bankers'speeches we have a strong banking sector in europe. it has transformed from a shock propagator into a shock absorber. and under european

inflation than we have become used to. [ 1 ] i would like to draw your attention to four of these developments. the first is the reversal of globalisation. over recent decades, international trade increased very significantly relative to the size of the global economy ( graph 4 ). production became increasingly integrated across borders and this lowered costs and made supply very flexible. this growth in international trade helped lift average living standards around the world, and australia was a major beneficiary of the expansion in international trade. r e s e r v e b a n k o f au s t r a l i a graph 4 world trade * per cent of gdp % % * trade refers to the average of exports and imports. sources : ceic data ; oxford economics ; rba ; world bank now, international trade is no longer growing faster than the global economy. trading blocs are emerging and there is a step back from closer integration. unfortunately, today barriers to trade and investment are more likely to be increased than removed. this will inevitably affect both growth in living standards and the pricing of goods and services in global markets. the second important supply - side factor is demographics. up until recent years, the working - age population of the advanced economies was increasing steadily ( graph 5 ). the working - age population of china and eastern europe – both of which were being progressively integrated into the global economy – was also increasing. the participation of women in the labour force was also on the rise. the result was a substantial increase in the number of workers engaged in the global economy, and advances in technology made it easier to tap into this global labour force. graph 5 working - age population * age 15 – 64 m m china and eastern europe 1, 200 1, 200 1, 000 1, 000 advanced economies * dashed lines represent projections. sources : rba ; united nations this trend in working - age population has now turned. the working - age population is now declining and this decline is projected to accelerate. the impact of this is evident in the rising ratio of younger and older people in the population, particularly in the advanced economies ( graph 6 ). while the global population is still rising, it is mostly in countries that are not yet closely integrated into the global economy. graph 6 dependency ratio * ratio ratio 0. 6 0. 6 advanced economies 0. 5 0. 5 0. 4 0. 4 china and eastern europe 0. 3 0. 3 * the number of people aged younger than 15 years