has remained stable. fiji ’ s one percent average productivity growth is less than half of that of australia. mauritius ’ is four times higher than fiji ’ s. it is obvious from benchmarking our performance against these countries that 6 / 8 fiji seriously lags behind in productivity growth. therefore, if we could raise productivity it would increase our economic growth without using additional capacity or resources. financial system let me say a few words on the financial system. fiji ’ s financial system is sound and stable. total assets are growing well and key prudential indicators of fiji ’ s financial system are strong. moreover, the reserve bank will modernise the country ’ s payment system by installing a real time gross settlement ( rtgs ) system next year. in terms of combating money laundering and terrorism financing, the financial intelligence unit ( fiu ), which was previously operating from the reserve bank on an informal basis, will now be formally established when the financial transactions reporting act becomes effective at the beginning of next year. additionally, a capital markets group is exploring options to further develop the country ’ s capital markets. policy mix i have discussed some of the specific issues that can help us grow faster. i would now like to conclude by getting back to strategy. as i said, both fiscal and monetary policies have been pro - growth since 2000. the result has been a consistent improvement in our macroeconomic performance. but given that economic growth is now slowing, prices are rising and our balance payments needs protecting, one of the key issues facing policy makers is what policy mix can they put in place to address these issues simultaneously. unlike 2000, we are now faced with two additional issues. our debt level is now over 50 percent of gdp and the balance of payments deficit is widening now exacerbated by the hike in oil prices. for these reasons, the expansionary stance of policies up to now may not be appropriate any longer. we need a new strategic mix. what could this be? perhaps the panel can help us identify this. the new strategy will need to sensitively balance growth and macroeconomic stability in the short term. this balancing act is a tough one under normal circumstances but becomes more complicated with the general elections around the corner. but let me shed some thoughts on this balancing act. we have basically two pillars of policy, fiscal and monetary. one of the realities of policy making is that by its nature, fiscal policy has a more immediate and powerful impact on the economy through its annual budget than monetary

been high, particularly in straight bonds. growth in monetary aggregates in terms of m2 + cds year - to - year average outstanding has continued at around 3. 0 per cent. 3. looking at individual components of final demand, public - sector investment will be supported by implementation of public works included in the government ’ s supplementary budget for fiscal 1996 for the time being, but it is expected to follow a declining trend. net exports, on the other hand, are likely to continue to be steady even after the recent large increase. this reflects the robust increase in overseas demand, and the recovery in the price competitiveness of japan ’ s manufacturing industry supported by the yen ’ s depreciation until early spring. in these circumstances, corporate profits on the whole are expected to continue improving in fiscal 1997 although with varied strength across sectors. business fixed investment is also expected to continue increasing, mainly reflecting 1 ) increases in corporate profits, 2 ) further progress in capital stock adjustments, and 3 ) the rise in information - related investment. however, because of the remaining balance - sheet adjustment pressures and the absence of leading industries, the increase in business fixed investment is unlikely to gather significant momentum for the time being. the growth in the employees ’ income has been rising gradually owing to the increase in bonus payments and the moderate recovery in employment growth, reflecting the improvement in the labor market conditions. this shows that the recovery in the business sector has spread to the household sector. thus, recovery in personal consumption is expected to continue after the reaction to the rise in demand ahead of the consumption tax hike subsides in the near future. however, the pace of recovery is likely to be moderate considering the increases in the tax burden, such as the rise in the consumption tax. meanwhile, housing investment, which is in a generally favorable environment including low interest rates, is expected to recover somewhat in the second half of fiscal 1997, although it has recently been weak reflecting the reaction to the surge in demand ahead of the consumption tax hike. 4. with respect to price developments, the downward pressure on domestic prices from the increase in manufactured imports has weakened, as the rise in import penetration rate has paused. on the other hand, the upward pressure on import costs from materials prices has also subsided owing to the decline in crude oil prices since spring 1997 and the appreciation of the yen. thus, import prices are not exerting significant upward nor downward pressure on domestic prices. meanwhile, final demand will continue to recover on the whole,