our exporting and importcompeting industries super - competitive, and hence it is exerting an expansionary influence on the economy. on fiscal policy, the need to more than compensate consumers for the imposition of the gst ensured that it moved in an expansionary direction between last financial year and the present one. again, i think we can all agree that, even though the budgetary position will remain in surplus for mediumterm purposes, the current stance of fiscal policy is not imposing a contractionary influence on the economy. overall, therefore, i conclude that because the economy has not developed the imbalances of the past, it has not been necessary to attempt to remedy them with the sort of counter measures in the fiscal and monetary areas that were often needed in the past. this is another way of saying that we have, in my opinion, avoided the boom - bust cycle in economic policy, and hence have an excellent outlook for the coming year. i have no further comments to make on the economy at this stage, but will be happy to answer your questions. the only other point i would like to make concerns the economics of banking. in the past, we have often provided to the committee a paper on some banking subject, such as bank margins or bank fees and charges. on this occasion, there is no special paper, but we have recently finished a major study, in conjunction with the accc, on interchange fees in credit and debit card schemes. we will be happy to answer any questions on that study. “ recent influences on the exchange rate ”, address to ceda annual general meeting dinner, melbourne, 9 november 2000.

in the exchange rate. it is never easy to digest three such events in one year, so we have to be especially vigilant to make sure that any rise in prices is “ onceoff ”, and on - going inflation does not rise to the point where it threatens our medium - term objectives. so far, we seem to be on track to pass this test. the gst caused a smaller rise in the september quarter cpi than expected and, on balance, the data on wages suggest that wages are growing in a way consistent with our inflation target. but there is still some way to go before we can be confident that these temporary factors do not push us off course. if it turned out that the economy was more buoyant than we think, the chances of the shocks feeding into higher on - going inflation would rise. i will now talk about risks that the outlook for economic activity could be weaker than we currently envisage. but before doing so, i should remind you that our forecasts already embody a slowing in gdp growth compared with last year, and a more pronounced slowing in domestic demand. so we are not oblivious to the presence of some factors which point to a less buoyant outlook than we have had over recent years. the first of these risks is the world economy, and the united states in particular. for some time now, most observers have expected lower growth in 2001 than in 2000 for both the world economy and the united states, but there is always the risk that the turnaround could be sharper, particularly if there is a shake - out in asset prices. no - one can be sure that, after such a long expansion, the united states can achieve a soft landing, but at present the odds point to this result. on the domestic front, the area of weakness that many people point to is in housing construction. there is no doubt that there will be a big contraction here, but we should remember that it was predictable ( and has been predicted by virtually all forecasters for some time ). we have just gone through a period when activity in the housing sector was really quite frenzied. at its peak in the june quarter, investment in dwellings was at its highest level ever as a percentage of gdp. a lot of activity in the housing sector that would normally have taken place this financial year was brought forward into last financial year in order to get in before the gst, so the cycle in housing is likely to be more pronounced than