9 / 8 / 2017 remarks at the bank of china sydney branch's 75th anniversary celebration dinner | speeches | rba speech remarks at the bank of china sydney branch's 75th anniversary celebration dinner philip lowe governor sydney – 8 september 2017 [ acknowledgement of special guests and hosts ] it is an honour to be here this evening to celebrate the 75th anniversary of the opening of the bank of china's first branch in australia. on behalf of the reserve bank of australia, i would like to pass on our warmest congratulations. the story of how the bank of china came to establish a branch in australia in 1942 is a story of resilience and friendship. over recent weeks i have had the opportunity to read about this story through the yellowed pages of the reserve bank's archives. when conflict came to singapore in 1942, mr parkane hwang from the bank of china's singapore branch decamped to what was then known as batavia. from there, he sought a visa to travel to australia to establish a branch of the bank of china in sydney. it must have been a difficult and stressful time. true to australia's welcoming nature, especially to those in need, the visa was granted. by midyear, the branch was in operation, with mr hwang's deputy from the singapore branch, mr s. c. lu, as its representative. in those days it was quicker to get a banking licence than it is today! it is clear from our archives that the granting of this licence was a significant sign of friendship by australia towards china. it was very unusual at the time to grant such licences. upon the licence being granted, one of my predecessors as governor – governor h. t. armitage of the commonwealth bank of australia, which at the time carried out central banking functions – wrote to mr lu to congratulate the bank of china on the new branch. i would like to read from that letter, as 75 years later i could not have put it better myself. governor armitage wrote : http : / / www. rba. gov. au / speeches / 2017 / sp - gov - 2017 - 09 - 08. html 1 / 3 9 / 8 / 2017 remarks at the bank of china sydney branch's 75th anniversary celebration dinner | speeches | rba ‘ i feel sure that the entry of your bank into the australian banking system will not only be of inestimable value in facilitating business relationships between china and australia

slower but still pretty good growth in asia. but at the same time, expected higher contract prices for coal and iron ore, which are about to take effect, will, all other things equal, lift australia ’ s terms of trade by perhaps a further 15 per cent, adding some 2 to 3 per cent to national income over the next year or so. this expansionary impetus comes after the earlier rise of some 40 per cent over the previous five years. so the world economy presents some considerable cross currents for australia. the biggest terms of trade boom for 50 years is coinciding with one of the most serious malfunctions in developed country capital markets for a long time. looking to domestic conditions, most indicators of actual economic performance for the early part of 2008 have remained quite strong. employment has been very robust, and survey based measures of actual business conditions have remained strong, even if off their late 2007 highs. we do think, however, that demand growth in australia is now in the process of moderating. the demand for credit by households has also been weakening over recent months. measures of confidence have declined. while those measures can provide false signals, our assessment is that a change in trend is occurring, and we are hearing that from businesses we talk to. a tightening in financial conditions, lower share prices and heightened concerns over the global financial problems will all have played a part in this change. the likely extent and persistence of this slowing in demand is quite uncertain, as these things usually are. there remain powerful conflicting forces at work, so we can expect that difficult issues for judgment will remain with us for some time. these are issues with which the rba board has to grapple. at its meeting this week, the board reached the view that, for the time being, policy settings should remain unchanged. the current rate of inflation is clearly uncomfortably high, and were expectations of high ongoing inflation to take root, it would be even more difficult to reduce inflation again. hence, policymakers are obliged to have in place a policy setting that represents a credible response to evident inflation pressures. but the significant tightening in financial conditions that has occurred since mid 2007 is a strong response. short term interest rates are towards the top end of the range experienced during the low inflation period. the board is also conscious that some non price tightening of credit conditions is probably occurring at the margin. these factors should be working to slow demand. there is at least some evidence that a moderation in demand is occurring.