cannot be preserved by the goodwill of one side alone. one cannot overlook the difficulties of the current situation, be blind to growing geopolitical differences or ignore the prospect of an increasingly polarised world. much in this is highly political, therefore beyond the scope of this conversation. concerning economic and financial institutions, one should be both realistic and hopeful. the goal, to quote raghuram rajan, should be to create ( or rather, maintain )'safe spaces in which countries, albeit with different values and systems, can interact regardless of their respective domestic policies or international tensions '. looking ahead, this needs genuine engagement on all sides. 3 / 3 bis - central bankers'speeches

##ised system. we had a number of public enquiries to guide the process, including the development of a regulatory framework that sought to strike the right balance between prudential regulation and market competition. of course, this is an on - going endeavour and the journey is never ending. a second familiar discussion is that about the exchange rate and the openness of the capital account. in the decades leading up to the 1980s, australia experimented with almost every type of exchange rate regime. we had a peg to the british pound ( 1931 – 1971 ), a peg to the us dollar ( 1971 – 1974 ), a peg to a trade - weighted index ( 1974 – 1976 ) and then a crawling peg against a trade - weighted index ( 1976 – 1983 ). ultimately, none of these proved sustainable. these various regimes were complemented with a range of capital controls, which provided some degree of control over domestic monetary policy. over time, however, people got better at finding ways around these controls and true control over domestic monetary policy proved elusive. while the controls were gradually eased, the highly managed exchange rate regime with a partially open capital account was conducive to neither domestic nor external balance. after we had tried everything else, in the early 1980s we switched to a floating exchange rate and an open capital account. this decision has, perhaps, been more important than any other single decision in promoting stability of the australian economy. it has allowed australia to run its own monetary policy, to tap into the gains that can come from the international flow of capital, and to benefit from the stabilising properties of a flexible exchange rate in a world where there have been very large shocks, including to our terms of trade. a third familiar discussion relates to the need to develop supporting financial infrastructure before liberalisation takes place. those who wanted a slower pace of financial reform in australia would sometimes argue the preconditions were not right – that now was not the time to move ; that banks didn ’ t have the necessary credit assessment skills ; that the hedging instruments didn ’ t exist ; and the relevant markets were neither deep nor liquid. what we found, however, was that it was the restrictions themselves that were often preventing this supporting infrastructure from developing. a highly restricted system was simply not conducive to banks building the relevant credit assessment skills, or the development of hedging instruments, or the emergence of deep and liquid markets. when the regulations were lifted, the system began to respond.