is likely to have made a significant contribution to europe ’ s emergence from recession. meanwhile, economic growth in the us firmed and the economy in japan picked up perceptibly. on the other hand, concerns about a number of emerging economies increased. one of the factors resulting in more difficult financing conditions for emerging economies with structural problems was the announcement by the us federal reserve that it intended to reduce its securities purchases. overall, growth in the global economy in 2013 was weak and uneven, and remained marked by uncertainty. will this situation change in the current year? probably only to a limited extent. according to our assessment, although the cycle has probably bottomed out, the challenges remain formidable. i will now outline the international economic position in more detail. bis central bankers ’ speeches global economic outlook for 2014 in 2014, growth in the global economy is likely to be stronger than in 2013. nevertheless, regional differences will remain substantial. while relatively robust growth can be expected in the us, the signs are pointing to a modest and uneven recovery in the euro area. a slightly stronger economic momentum than in 2013 can be expected in the major emerging economies, but they will not attain former growth rates. we therefore anticipate that expansion in the global economy will be no more than moderate. however, the recovery remains subject to significant downside risks. this is still largely due to the european debt crisis. you may be wondering whether the debt crisis is not already over. the extreme risks have indeed been eliminated. reform programmes introduced in some euro area countries, progress achieved in creating a banking union and measures taken by the european central bank ( ecb ) have clearly brought about an alleviation of the crisis. but the crisis has not yet been overcome – which is hardly surprising, since structural reforms are also required if this is to be achieved. it is important to acknowledge the efforts that have already been made in this respect in the affected countries, and as an onlooker one should be cautious when making recommendations. yet there is broad consensus that additional structural reforms are needed and should be implemented consistently. such reforms should increase the growth potential of the countries affected and allow them to significantly and sustainably reduce their high level of unemployment and debt. additional efforts are also required in the banking sector. consequently, the bank review to be carried out by the ecb is extremely important. only a healthy banking sector is capable of supplying the economy with sufficient credit. however, risks also exist outside the euro area. the

such as our first nations australians. these structural issues – which are a focus of the australian government ’ s employment white paper – are beyond the ability of monetary policy to address. monetary policy ’ s primary role in supporting full employment over the longer term is to ensure that inflation remains low and stable. although, as i hinted at earlier, it may have some impact at the margin if a strong labour market permanently lowers the unemployment rate that we typically associate with full employment. developments in recent months in recent months, the balance between labour demand and supply has improved somewhat as the sharp increase in net arrivals from overseas may have helped to alleviate shortages in some areas and labour demand has moderated as the post - pandemic recovery has run its course. the significant tightening in monetary policy over the past year has also played a role in this, as intended. this moderation in labour demand can be seen in a range of indicators, such as job advertisements and employment intentions ( graph 9 ). the unemployment rate has also bottomed out, and there are signs that turnover is declining and labour shortages in some areas are easing. nevertheless, the labour market remains tight, with many firms still finding it challenging to hire workers and there are still roughly as many vacancies as there are unemployed people. graph 9 job ads and employment intentions likert score % 1. 0 2. 4 employment intentions * ( lhs ) 0. 5 1. 8 0. 0 1. 2 job advertisements * * ( rhs ) - 0. 5 - 1. 0 0. 6 0. 0 * over the year ahead ; smoothed using a 13 - month henderson trend. * * as a share of the labour force. sources : abs ; jobs and skills australia ; rba. monetary policy and full employment so, how do we think about full employment in the context of setting monetary policy? i noted at the beginning that, simply put, full employment means that people are able to find a job without having to search for too long. this does not mean an unemployment rate of zero. there will always be frictions in the labour market that mean it takes time to find a suitable job, including because the skills required do not match the candidates available or there are structural impediments to employment. these issues are best addressed by government policies. for monetary policy, our price stability mandate requires a narrower concept of full employment. we think of full employment as the point at which there is a balance between demand and supply in the