- content / uploads / chief - scientist - submission - to - senate - inquiry - intoaustralias - innovation - system1. pdf ; and ceda ( 2013 ), “ australia adjusting : optimising national prosperity ”, november. available at http : / / www. ceda. com. au / media / 338287 / cedaaustadjusting _ web. pdf. bis central bankers ’ speeches responsibility for the g20 now passes to turkey. we can bask in the glow of success for a few weeks and then get on to other matters. the point simply is that this has gone well as a result of the determined efforts of a range of people who were clear about what they wanted to achieve and who mobilised the necessary resources and effort to get there. one other result of australia ’ s leadership of the g20 is that the whole issue of infrastructure is well and truly on the table. no one doubts the need for infrastructure provision and it has clear economic attractions. spending on infrastructure supports aggregate demand during construction but, if done well, also augments the economy ’ s supply capacity for the long run. it is also clear from the various discussions over the past year that there is not a shortage of capital in global markets to fund infrastructure projects. the issues to be overcome don ’ t include finding the money. they concern appropriate project selection criteria, long - term planning, governance, contract design, appropriate risk sharing between public and private sectors, pricing usage of the infrastructure and so on. there is an opportunity here, including for australia, to do something of value over the years ahead. of course, we will need to be serious and to put in the effort over an extended period – in all the above areas. if we don ’ t put in that effort, not much actual infrastructure will be delivered. but if we are serious, a lot could be achieved. i imagine that the committee for the economic development of australia would be keen to be involved. conclusion i have reached the limits of our time this evening. australia ’ s economy is continuing to grow, moderately. it has been responding in ways you would expect to the remarkable set of circumstances it has faced over the past decade. there is continuing adjustment ahead and doubtless no shortage of challenges. but beyond these challenges of the next couple of years, maximising our economic possibilities in the modern world requires sustained efforts at adaptation and innovation, at doing things better and, perhaps most of all,

and the ratings agencies seem to lie behind a perpetual question mark about australia and its financial institutions. it is unlikely we will ever be able to change definitively the views of all the sceptics. and – let us be clear – we should welcome the sceptics. perhaps some of their concerns are valid. the reserve bank gives a lot of thought to these issues ; we certainly do not dismiss them. we should always be wary of the conventional wisdom being too easily accepted. we should never, ever, assume that “ it couldn ’ t happen here ”. it is in that vein that i wish to pose a set of questions that are thrown up by these sceptical views. in particular : how much of the recent relatively good performance was due to luck? to what extent did we improve our luck by sensible policies, across a range of economic and financial fronts? are there signs of any of the things going wrong that people typically worry about? bis central bankers ’ speeches and if there are, or were to be, such signs, could we do anything about it? to begin, i shall re - state some key metrics. graph 1 graph 2 bis central bankers ’ speeches graph 3 these charts really require no exposition ( graph 1, 2 and 3 ). the message is clear. it is fair to conclude that, given the circumstances internationally, the australian economy has exhibited more than acceptable performance over recent years. this conclusion would stand whether comparisons were made either against most other countries, or against our own historical experience. why was it that australia did not have a deep downturn in 2009 when so many other countries did? and why was it that we have returned to reasonable growth, when others have struggled to do so? this question has been answered on numerous occasions. there are several elements. first, the australian banking system went into the crisis in reasonable shape. to be sure, there were some poor lending decisions during the preceding period of easy credit and there was, in hindsight, too much reliance on wholesale funding. but among major institutions, credit quality issues have turned out to be manageable. asset quality was not as good among some of the regional banks, and even less so among some foreign banks operating in australia, but the problems have not been insurmountable. some observers might counter that the banks received assistance with wholesale fund raising in the form of the government guarantee. but the banks paid for that, and it was an appropriate response at a time of massive market di