below where they were in the period of very high interest rates in the 1980s. for the most part, our view has been that this general trend was to be expected in the circumstances of low nominal interest rates, greater access to financial products, and a starting point where australian households had little debt by international standards. with one exception, we have not rushed to ring alarm bells about excessive debt. the exception is, of course, the rapid growth in debt to finance investment in rental properties, where we felt during 2002 that people were being drawn into a position of high leverage by unrealistic expectations of returns. at some stage down the track, this is likely to result in disappointment for many and distress for some – hence we had a duty to speak up. more generally, however, there is a very large accumulation of wealth which remains, as yet, untapped. one of the important questions is to what extent households will be inclined to draw on this in the future. many factors will be at work in determining the answer. for a start, how permanent is the wealth gain? the more confident people are that it is permanent, the more likely they are to draw on it. demographic and distributional factors will also be important – who owns the assets and who owes the debts? i think we are only in the early stages of coming to an understanding of all these things, and there will be much discussion of them in the years ahead. then there is business investment activity, which as i noted earlier has been rising over the past year. judging by the broad historical patterns, this has some way to run yet. investment levels still seem a little lower than historical averages. profits are strong, and new funding is readily available. corporate balance sheets are strong. so conditions seem conducive to further investment increases, and indeed the available forward indicators point to further growth in the year ahead. conclusion australia still faces a difficult environment abroad. uncertainty is high internationally at present, and confidence subdued. it is to our advantage that this appears to have affected australians relatively little ( indeed, it is comparatively rare to see australians more confident in surveys than americans ) and this has helped australia perform well. nonetheless, global conditions have been a major drag on the economy over the past couple of years. in the coming year, domestic demand in australia will continue to grow, although probably more moderately than in the recent past. most forecasters anticipate that the drag from abroad will begin to ease as the year goes

on. if so, the net of those forces will mean that australia will record overall growth a bit lower than we have seen most of the time in recent years, although still a pretty respectable outcome. in the circumstances, i think that's about as good a result as we could sensibly hope to achieve. provided that we remain relatively free of imbalances at home, we could then expect to benefit from better economic conditions abroad once the current adjustment phase gives way to greater optimism and expansion – even though we cannot be sure when that will be. a return to more normal weather patterns, which we all hope will occur, would also give a boost through the farm sector. throughout that we all face challenges of various kinds, and i wish you well in meeting them. thank you.