While interest rates were kept low to nurture private sector credit growth – this did not traditionally happen as private sector investment remained subdued due to host of structural problems facing the economy. Instead low interest rates nurtured fiscal indiscipline as the Government continued to borrow at cheaper rates to finance expenditures.
The Chinese authorities face the difficult challenge of getting the balance right between containing medium-term risks and supporting near-term growth, and we continue to watch developments there closely. I would now like to turn to the Australian economy. On balance, the news over the summer has generally had a more positive tone than it has had for a while.