glenn stevens : interesting times address by mr glenn stevens, governor of the reserve bank of australia, to the australian business economists annual dinner, sydney, 9 december 2008. * * * it is a pleasure once again to address the australian business economists. it was to this group that i gave my first speech as governor, in october 2006. tonight is my 23rd speech since then. between the two occasions, quite a lot has changed, globally and domestically ( though i doubt the speeches have become any more exciting ). many people have said to me recently that the times are “ interesting ”. my response has been that they are, perhaps, a little too interesting. i need not remind this audience of the international financial turmoil through which we have lived over the past almost year and a half, nor of the intensity of the events since mid september this year, in particular. i do not know anyone who predicted this course of events. this should give us cause to reflect on how hard a job it is to make genuinely useful forecasts. what we have seen is truly a “ tail ” outcome – the kind of outcome that the routine forecasting process never predicts. but it has occurred, it has implications, and so we must reflect on it. in that spirit, i shall set out a few features of this episode that make it “ interesting ”. the most obvious one is the prominence of financial events and particularly financial sector impairment in key countries. there have been other episodes where individual financial institutions or sectors, or even the whole banking systems of small countries, have needed recapitalisation. but the scale of capital needed, the number of countries where it is needed and the extent of counterparty risk aversion because of concerns over solvency have been outside the range of experience of the past half century. in the near term, financial stress brings the obvious concern about the ability of the financial system to provide credit to the economies in question. as one measure of this concern, the number of loans approved for housing in the united kingdom in october was 65 per cent lower than a year earlier, and about 50 per cent lower than during the downturn of the early 1990s. the immediate need is to keep ample liquidity, strengthen banks ’ balance sheets by adding capital and to help confidence, including by lending the strength of the sovereign ’ s credit rating where necessary. all this has been occurring. what may still be needed internationally is attention to the remaining problem assets, since if their prices continue to decline

electronic payments are kept low and the electronic payments system is resilient. while it will be important to ensure that people who have traditionally used cash and cheques are adequately catered for, the experience of the past few months has demonstrated that the shift to electronic is perhaps not as difficult as many had thought. endnotes [ * ] thanks to faye wang for assistance with this speech. see rba ( 2019 ), ‘ review of retail payments regulation – issues paper ’, november. available at < https : / / www. rba. gov. au / payments - and - infrastructure / review - of - retail - payments - regulation / >. see australian payments council ( 2019 ), ‘ payments in a global, digital world – the australian payments council strategic agenda ’. © reserve bank of australia, 2001 – 2020. all rights reserved. the reserve bank of australia acknowledges the aboriginal and torres strait islander peoples of australia as the traditional custodians of this land, and recognises their continuing connection to country. we pay our respects to their elders, past, present and emerging.