If we now add and subtract expectations about the general rise in prices in the economy, we are left with the following four variables that have a bearing on user costs: house prices, longterm real interest rates, capital depreciation and expected real rise in house prices.5  3  As did, for example, Knut Anton Mork, chief economist in Handelsbanken Norge, in the Norwegian financial daily Finansavisen on 25 August. 4  See for example Lebow, David E. and Jeremy B. Rudd (2003): “Measurement Error in the Consumer Price Index: Where Do We Stand?” Journal of Economic Literature, vol. XLI, pages 159-201, or Boskin, Michael J., Ellen R. Dulberger, Robert J. Gordon, Zvi Griliches og Dale Jorgenson (1996): “Toward A More Accurate Measure Of The Cost Of Living.” Final report to the Senate Finance Committee, Advisory Commission to Study the Consumer Price Index, 4 December 1996 or Gordon, R. J. (2005): Apparel price 1914-93 and the Hulten/Brueghel paradox, NBER Working Paper 11548. 5  For purposes of simplification, capital gains tax of 28 per cent is disregarded. Interest rate expenses are tax deductible, while capital gains on the sale of a dwelling are not liable to tax if the dwelling has been owned for more than 12 months and the dwelling has been occupied by the owner for at least 12 of the 24 months prior to sale. Any losses are tax deductible only if any capital gains are liable to tax.
In a world of low growth, the political rhetoric in some major economies has tended to focus more on the costs and less on the benefits. That is unfortunate, because given the current circumstances of the global economy, it is likely that we need deeper and fairer integration. For emerging economies in Asia and Latin America, the question for us is whether deeper economic and financial integration offers a feasible path towards unlocking sustainable growth of our economies? How do we mitigate the costs and maximise the benefits? The World Bank theme paper for this conference provides a useful starting point for thinking about these issues. I will leave it to the learned speakers today to ponder on that. I will just briefly share my perspective on this issue with respect to ASEAN and Malaysia. Asian regional economic and financial integration The ASEAN Economic Community Blueprint 2025 contains ASEAN’s vision of regional economic and financial integration over the next 10 years. When it came to formulating the 2025 Blueprint, the issue of the nature of integration has always been central. The fundamental challenge remains on how to use regional integration to leverage on ASEAN’s diversity in terms of economic size and structure, income levels, resource endowments and stage of financial sector development. Here, in the interest of time, l will just focus on ASEAN financial integration. I remember that soon after the Asian Financial Crisis, there was a lot of interest in looking at the European model of a single currency.