favour of a retail payments system that provides users with a wide choice of options from a wide range of providers. each payments method has its strengths and weaknesses, and so users should be able to choose the most suitable payments method for each particular type of transaction. in some cases the pricing of the transaction enables them to do so in a manner which contributes to an efficient low - cost retail payments system, while in some other cases it does not. the best way of improving efficiency is usually to increase competition rather than to regulate, but i think i have shown that some parts of the retail payments system are constructed in such a way that competition increases costs and reduces efficiency. in those areas, regulation is required, and the reserve bank through the payments system board will continue with its task of improving efficiency, competition and safety of the retail payments system.

it was no coincidence that households felt they were getting wealthier. gross assets held by households more than doubled between 1995 and 2007. the value of real assets – principally dwellings – rose by more than 6 per cent per annum in real, per capita terms over the period ( graph 3 ). these are updated versions of charts i first used one year ago. see stevens, g, “ the cautious consumer ”, address to the anika foundation luncheon, sydney, 26 july 2011. bis central bankers ’ speeches graph 3 only a small part of this was explained by an increase in per capita expenditure on dwellings. the bulk of it came from rising prices. moreover, a good deal of borrowing was done to hold these assets and household leverage increased. the ratio of aggregate household debt to gross assets rose, peaking at about 20 per cent. there was definitely a large rise in measured net worth, but relative to aggregate annual income, gross debt rose from 70 per cent in 1995, to about 150 per cent in 2007. correspondingly, by 2007 the share of current income devoted to servicing that debt had risen from 7 per cent to 12 per cent, despite interest rates in 2007 being below those in 1995. it is still not generally appreciated how striking these trends were. i cannot say that it is unprecedented for spending to grow consistently faster than income, because it had already been doing that for the 20 years prior to 1995. that is, the saving rate had been on a long - term downward trend since the mid - 1970s. but it is very unusual in history for people to save as little from current income as they were doing by the mid - 2000s. and it is very unusual, historically, for real assets per person to rise at 6 per cent or more per annum. it is also very unusual for households actually to withdraw equity from their houses, to use for other purposes, but for a few years in the mid - 2000s that seemed to have been occurring. of course, australia was not alone in seeing trends like this. there were qualitatively similar trends in several other countries, particularly english - speaking countries that experienced financial innovation. the international backdrop to this period was the so - called “ great moderation ”, in which there was a decline in macroeconomic variability. there were still business cycles but downturns were much less severe than in the 1970s or 1980s, inflation was low and not very variable, which meant that nominal interest rates also were generally low and not very variable, and