system stability. 9 this is a natural response to the circumstances, but it is really a refocusing on one of the key original purposes of the central bank. all of that history is a backdrop to the financial trends of the past decade, to which i now turn. the british governments of the day. he writes : ‘ at almost every point at which banking and monetary policy might have been used constructively to promote economic growth, the authorities either made the wrong decision or took no action at all. ’ see cameron, r. ( 1967 ), ( ed. ) banking in the early stages of industrialization : a study in comparative economic history, oxford university press, new york, p. 58. for example, the bank of england was granted its charter – establishing it as britain ’ s first limited liability banking entity – in 1694 after raising £1. 2 million for the government to fund expenditure in the war with france. bagehot, w. ( 1873 ), lombard street : a description of the money market, henry s. king and co., london. it is not mere coincidence, by the way, that this came at the same time as the macroeconomic instability concerns of the 1960s, 1970s and 1980s receded. better macroeconomic stability has coincided with, and in all probability encouraged, a dramatic increase in the size and complexity of financial activity. financial and economic trends in australia in the past decade the most prominent financial development of the past decade has, of course, been the change in the structure of the balance sheets of households. much has been said about this and so any description here can be brief. the essence of the story is that in the early 1990s, two decades of chronically high inflation in australia ended. interest rates declined as a result. in fact, they returned to levels last seen in the low - inflation period in the 1960s. but in the intervening period, of course, the australian financial system had changed out of all recognition, a result of liberalisation, competition and innovation. no longer was the potential borrower for housing on bended knee to a stern - faced bank manager, the way they had been in earlier periods of low rates. now, lenders were under more competitive pressure to grow their balance sheets. having pursued the corporate borrowers in the 1980s, with rather mixed success, they were now looking to households as a source of growth. we can all recall the advertisement for one major bank in which the formerly stern manager pract

and links in all of this, it would have to be said that the present moment is a rather disappointing one. a good case can be made that australia served a useful role during the crisis, first of all as participant in the support packages ( japan was the only other country to contribute to all three ), but more importantly in its assessment of the crisis as it unfolded, and its attempts to point out deficiencies in the multilateral approach, with the visit of our foreign minister and the rba governor to the united states in early 1998. however, it would have to be said that this voice was not heard, and very little was achieved. australia ’ s own performance during the asian crisis might be a positive example and a reminder of the benefits of competent policies, but may well have been mistaken, by our asian neighbours, as boastful blowing of our own trumpet during a time of their misfortune. the souring of our relationship with indonesia over timor has blocked off a potentially important entree into the asean arrangements. our best chance, now, is to build on the myriad spider - web ties which bind all sorts of australians - business people, academics and officials - to their counterparts in asia, in the hope that this network proves a strong enough foundation for us to take a vigorous role in whatever regional arrangements are formed in asia.