large proportion of highly skilled and educated people would make it difficult to exit the middle income trap. labor force with high education is crucial to shift the existing majority of labor - intensive / low - technology and resource - based industry up to the middle or high technology industry. 24. the development of human capital would lift up the productivity level of the labor force, which would in turn enhance indonesia ’ s competitive advantage, which is an important prerequisite to excel within the current asean economic community era. 25. infrastructure problem also poses as indonesia ’ s major constraint for accelerated growth. connectivity issues among regions, including the need for high quality and high capacity harbors, airports, roads and railways in indonesia have spurred logistical costs. manufacturing activities related to exports and imports are especially in need of appropriate harbors, even for java region which contribute the largest part to the national economy. 26. in addition, energy particularly electricity, also becomes a crucial issue and serves as important prerequisite for domestic industry ’ s development. a reliable and adequate supply of electricity would attract investors ’ interest to build manufacturing facilities in indonesia. the increased foreign direct investment will enhance indonesia ’ s role within the global value chain. 27. policy simulation in our growth diagnostic research indicates the importance of resolving these human capital and infrastructure issues for growth acceleration process. bank indonesia found that modest increase in electricity capacity and human development will each enhance growth of around 0. 25 % per year, while enhancement in the quality human capital will contribute to an increase in employment of around 0. 50 %. ladies and gentlemen, policy priorities 28. to address the existing challenges, i believe we have come to a common understanding that reforms to improve the economic structure should be underlined and properly implemented. cyclical policies from monetary and fiscal domains remain indispensable indeed, but not sufficient as it only responds to short term recurrent symptoms. bis central bankers ’ speeches 29. thus far, bank indonesia ’ s monetary and macroprudential policies have been among the key factors in safeguarding macroeconomic stability, which support the structural reforms pursued by both central and regional government. 30. bank indonesia has lowered bi rate and primary reserve requirement as available room to ease monetary policy became apparent on the back of solid macroeconomic stability, including lower inflationary pressures going forward. however, stability remains the priority. 31. in this regards, bank indonesia will also continue to strengthen coordination with the government. in addition, by cooperating in harmony with other authorities such as indonesia

roughly matched in frequency and duration by periods below – as we are having now. if we set our aspirations higher than that – if we try for above - average performance all the time – we will just get inflation. that is the economics of full employment. now you may feel that a growth rate for real gdp of something like 3 per cent on average is not that high. is that the best we can do? can ’ t we lift it? the only way the potential growth rate can be lifted is by adding more factors of production – more labour and capital – or raising the growth rate of productivity. over the long term, the key is productivity. on that front, productivity growth does seem over the past several years to have settled at a lower average rate than we had seen since the early 1990s. this may have several causes, and the experts debate them. but over the years ahead, as a community we must be sure not to let up on our efforts to keep productivity growing. i have no specific policy prescriptions here – only general ones – trying to sustain competition, to keep markets open, to maintain flexibility and so on. but those general values are worth recounting from time to time. household balance sheets a feature of the economic landscape of the past decade and a half has been the long gearing up of households. in the early 1990s, household gross debt in australia was equal to about 50 per cent of average annual household disposable income. this year, it reached about 160 per cent. households ’ assets rose generally in parallel, though not quite as fast, with total assets rising from about 460 per cent of income in 1990 to over 800 per cent at the end of 2007. ( assets have fallen somewhat since then, with the decline in the share market and some softening in housing prices. ) the ratio of debt to assets rose from under 10 per cent in 1990 to about 18 per cent in 2008. the ratio of housing debt to housing assets reached about 27 per cent. very similar trends have been seen in a number of comparable countries around the world, so in thinking about the causes, we should not look exclusively for domestic causes. but in summary, the main factors behind this big increase in the size of the household sector ’ s balance sheet were : • the general tendency for financial activity and wealth to grow faster than income, which has been a feature of most economies since at least as far back as the 1950s ; • an increased pace of financial innovation –