However, we should have some confidence that a successful transition can be made, particularly given our flexible market-based economy. Among other things, this transition is being assisted by three developments: the lower exchange rate; restraint in aggregate wage growth; and the stimulatory setting of monetary policy.
In terms of the exchange rate, over the past two years the Australian dollar has depreciated by around 20 per cent on a trade-weighted basis and by around 25 per cent against the US dollar. We are now starting to see signs that this depreciation is boosting activity in various parts of the economy.