*  *  *  I am very pleased to be able to participate again in CEDA’s annual Economic and Political Overview. In line with the theme of this morning’s conference, I would like to discuss a couple of issues that will have an important bearing on economic developments in Australia over the next year or so.
I would speak of deflation when both prices and output are falling and the problem is getting worse and worse – because people don’t invest or consume when they are waiting for prices to fall further. So far, that hasn’t been the case. However, inflation rates throughout Europe are extremely low and far removed from 2%, from what central bankers define as price stability.