the authorities have struggled to contain the ebullience. some of china's growth has been courtesy of a rise in exports but, even if that contribution to growth diminished, china would still be growing very strongly as domestic spending has been rising rapidly. with very high saving rates at present, there would appear to be plenty of scope for further rises in consumption spending over time, as the chinese people become accustomed to higher incomes. a slower pace of growth in the g7 will presumably trim this growth to some extent. but my guess is that china can cope with that. the chinese authorities may even welcome some moderation in growth. if china does suffer a serious interruption to growth at some point – and all economies do from time to time – it is more likely, in my judgement, to be caused by some domestic problem than by the sort of events we are witnessing in the developed world at present. for australians, it will be just as important over the years ahead to keep an eye out for imbalances in the chinese economy as to watch the problems of the us economy. all told, it seems likely that, after several strong years, global growth will be noticeably slower in 2008. much of this slowing will be driven by weaker outcomes in the developed world, particularly in countries facing tighter credit conditions. some of the g7 economies are likely to experience a period of growth well below trend. it seems likely that this will affect emerging market and other economies mainly via trade linkages. at this stage, it is not clear how significant this effect will be, but it seems prudent to assume that we will be moving from a position where growth in the global economy has been well above trend to one where it will be no more than trend. some moderation in the pace of global expansion is welcome, given the pressure on prices for energy and raw materials we have seen in recent years. but the full picture for this phase of the international cycle will become clearer only over time. australia what then of the outlook for australia? the continuing rise of chinese and other incomes through those levels at which resource usage intensifies significantly has meant strong and persistent demand over recent years for the mineral resources with which australia is abundantly blessed. at this point, there appears to be a widespread expectation that contract prices for some key resources will rise in 2008. if they do, australia ’ s terms of trade, which have already risen by about 40 per cent over the past five years, would move higher still

measure markups and a broad range of indicators ( such as the evolution of firm concentration and firm dynamics ). in the united states, the observation of rising firm markups and concentration rates, combined with a decline in business dynamics – in particular the entry of firms – has led to the consensus that firms ’ market power is on the rise in the economy as a whole. 2 at the same time, there is a lively debate about the drivers of this development. some authors suggest that firms ’ market power and concentration are driven by weakening antitrust enforcement, and link rising market power to a number of welfare - reducing secular trends, such as the decline in productivity and the rise in inequality. others argue that market concentration and rising markups are a natural side effect of the rise of global technology giants, and see such developments as beneficial for growth, to the extent that they spur investment and innovation. today, let me review the euro area evidence. the evolution of market power in the euro area recent work by ecb staff3 shows that the euro area economy wide mark - up has remained fairly stable over the past three decades, hovering around 10 %. it has even declined marginally since the late 1990s / early 2000s, in particular in the manufacturing sector. this clearly contrasts with 1 / 5 bis central bankers'speeches the evidence for the united states ( see charts 1a and 1b ). other indicators confirm the absence of any marked change in firms ’ market power in the euro area. concentration ratios have remained broadly flat over the last ten years or so4, and economic dynamism – the creation of new firms and jobs – has remained stable, albeit at a low level. finally, there is no evidence of emerging euro area - based “ superstar firms ” – firms that have a substantially greater share of sales than their peers, but a low labour share, and are pulling away from those peers over time. the largest euro area firms have, as in the case of the united states, a low labour share – the share of these firms in total sales is notably above their share of total employment in a sector. however, these firms ’ market shares have not grown in recent years. moreover, the markups of these largest euro area - based firms have remained broadly stable over the past decade, implying they have also not become more profitable ( see chart 2 ). 2 / 5 bis central bankers'speeches at the same time, there are signs that some large and growing global firms are entering euro area markets and