have exports in some other categories ( graph 3 ). many of these are areas where australia does have a comparative advantage and where value added is high. it is by focusing on these comparative advantages that we can best build a strong and successful manufacturing sector, while at the same time living with a high exchange rate. bis central bankers ’ speeches graph 3 i would now like to turn to the second broad factor that has helped maintain domestic balance during the once - in - a - century investment boom. and that is the increase in household saving. since the mid 2000s, the household sector net saving ratio has risen from around zero to around 10 per cent ( graph 4 ). in today ’ s money this represents about an additional $ 90 billion that is saved, not spent, by households each year. graph 4 now i know that this increase in household savings has not been universally welcomed by the retail sector. it has caused difficulties for some businesses, including those that based their business models on a continuation of the earlier trends. but consider how the economy might have looked over the past few years had households spent an extra $ 90 billion each bis central bankers ’ speeches year. it is likely that there would have been significant overheating. the exchange rate would have been higher. there would have been more borrowing from the rest of the world. and both inflation and interest rates would have been higher. i suggest that these are not developments that would have been warmly welcomed by most in the community. so, somewhat ironically, two of the factors that have created difficult challenges for many businesses over recent years – the high exchange rate and increased household savings – are the very same factors that have been critical to australia ’ s good macroeconomic performance. importantly, these factors have helped australia to digest a huge investment boom without generating substantial imbalances in the economy. at the same time, these factors have prompted significant structural change which, while difficult, is critical to achieving higher overall productivity and higher living standards. there is clearly a lot of change going on in the australian economy at the moment. how you view this change depends critically upon where you stand. however, no matter what one ’ s perspective, we should not lose sight of the fact that maintaining overall macro balance through this period of change has been a significant achievement. and it is an achievement that has benefited the entire community. the contribution of monetary policy so far i have discussed structural factors, but monetary policy has also played some role in helping maintain this overall internal balance. in

guy debelle : remarks on liquidity address by mr guy debelle, assistant governor ( financial markets ) of the reserve bank of australia, to the australasian finance and banking conference, sydney, 17 december 2013. * * * thank you to fari for again organising a good conference. today i will make a few points about liquidity. i have spoken about this on a number of other occasions, but one year out from the basel iii liquidity regime becoming fully operational, it is timely to do so again. 1 why do we have liquidity regulation? the fundamental answer is that banks engage in maturity transformation. they borrow short and lend long. this is a service which society values. there is a demand for banks to provide liquidity services. depositors place their savings with a bank but want to be able to withdraw some part of their funds at short notice. a corporate treasurer wants to have the company ’ s funds in an account where they can be accessed quickly to meet the needs of the firm. at the same time, we prefer to have our loans for substantially longer periods of time. it would be particularly inefficient and bothersome if we had to renegotiate our home loan on a monthly basis. more importantly, it would be very difficult to make any sort of long - term planning or investment decision if there were no long - term loans available. this desire for liquidity on the one hand and long - term lending on the other is intermediated by the financial sector and the banking sector in particular. but the maturity transformation this entails exposes the banking sector to liquidity risk. if all the depositors wanted their money back in a hurry, the bank would not be able to meet that obligation without either calling in their loans, which may be contractually impossible, or trying to sell them. the latter is often practically impossible to do at short notice, or even if it is possible, may only be able to be carried out by selling the assets ( such as loan portfolios ) at fire - sale prices. neither of those outcomes is socially desirable. fire sales run the risk of generating contagion to other financial institutions as the price of the asset falls, as they may well hold that same asset too, and / or may use it as collateral in transactions themselves. fire sales also limit the ability of the institution making the sale to make good on its obligations. so there are externalities to the asset that is being sold, as