of investors trying to assess how soon subsequent increases might occur. but sooner or later we have to see a start to the process of adjusting these financial prices and i would expect australian financial markets to be able to take all that in their stride. accepting adjustment the australian economy has been growing, but at a pace a bit below what we have traditionally thought of as average, as it adjusts to some pretty large changes in circumstances. the story of the phases of the “ mining boom ” is well known. commodity prices rose massively and have since declined ( though some prices remain pretty high compared with longer - run history ). investment spending followed suit – first it rose by about 5 to 6 percentage points of gdp, and now it is on its way back down. finally, shipments of resources picked up, as the new capacity created by the investment became available. as an aside, unlike the situation posited some years ago in the united states, and notwithstanding the growth of services, the physical weight of australia ’ s gdp has probably increased over the past decade. for iron ore and coal, annual tonnages being shipped from australian mines have increased by more than half a billion tonnes since 2004. growth in domestic demand, in contrast, is fairly subdued. over the latest year for which we have data ( to march 2015 ), final domestic spending rose by a bit under 1 per cent, as the fall in resources sector capital spending accelerated. capital spending by other businesses has been weak too, while public demand was roughly unchanged over that year. bis central bankers ’ speeches the weakness in those areas is juxtaposed, as you know, with changing household behaviour. after a lengthy period during which consumer spending growth ran ahead of income growth, and leverage ( measured as the ratio of debt to income ) almost trebled, households changed course some time ago. to be sure, the rate of saving from current income has declined a little over the past couple of years, which is what is expected at a time of very low interest rates and positive wealth effects resulting from rising asset values. but it remains significantly higher than it was a decade ago. the types of saving rates we see now are more likely to be “ normal ” than those of a decade ago. moreover, while some households ( such as first home buyers or, perhaps increasingly the same thing, first home investors ) are taking on more leverage, many others are reducing it. they are taking advantage of lower borrowing costs to repay mortgage debt ahead of

outcomes, to enjoy the benefits of a “ good society ”, or at a more basic level to provide public services and even to defend ourselves, ultimately rests on a productive economy. many problems, including distributional ones, are easier to deal with if per capita incomes are rising steadily, less so if they are stagnant. let ’ s be clear that this is not “ growth at any price ”. wealthy countries tend to have cleaner air, cleaner water, better health and education systems, and more demanding standards for environmental protection, employee safety and leave entitlements. they can afford to devote resources to such things because their business sector is so productive. they tend also to have higher wages – not because they decree wages shall be high but because welleducated, skilled workforces working with a lot of capital and modern technology are more bis central bankers ’ speeches productive. the poorest peoples usually have far less in the way of such things. if we care about wellbeing in the broadest sense, we should care about things that affect potential output per head. our citizens certainly care about the results. they don ’ t frame the question as being about per capita real gdp or productivity per hour and they care about more than just “ narrow ” outcomes for economic statistics. many would be concerned to reduce our environmental footprint. they would not wish to sacrifice civilising aspects of our society and culture, including many that result from government intervention. but nor will they accept a future in which they are marginalised in the global village because of unwillingness to adapt or to invest, or because of a failure to foster a growth economy. there is a lot of talk at present about “ reform ”. i would suggest that the case for “ reform ” needs to be presented as a positive narrative for economic growth. we all know that competitive markets, investment in education, skills and infrastructure, and adaptability, are key parts of that growth narrative. these reforms matter because of the gains to incomes resulting from better allocative efficiency. but they also, ideally, would support entrepreneurship and innovation – “ risktaking ” by another name and of the kind we want. measuring “ entrepreneurship ” is not straightforward and various studies have somewhat differing results. at the risk of oversimplifying, one might say that australians hold our own in the entrepreneurship stakes, but since we don ’ t generally score at the top in such surveys, there must be scope to improve. that too can be part of the