single market, which was as good as completed on 1st january 1993. a logical complement to this single market was the single currency. however, the acceleration of the integration process was not based on economic motives alone. in political terms, the maastricht treaty has sometimes been interpreted as a kind of trade - off : west and east germany were allowed to unite provided this locomotive would continue to pull european economic and monetary unification at a rapid pace in order to hedge the feared german supremacy in the new europe. be this as it may, the treaty officially entered into effect in november 1993, harbouring the prospect of a single european currency. on 1st january 1994, europe stepped into the second stage of emu and the european monetary institute ( emi ), the forerunner to the ecb, was established in frankfurt. the emi ’ s primary task is to strengthen the coordination of monetary policy between the eu member states - in early 1995, finland, austria and sweden joined the eu - and to prepare the third stage of emu. as mentioned, emu cannot be seen separate from the wish to establish, in the longer term, a politically unified europe as well. in order to prevent economic reality from being subordinated to this more than honourable wish, stringent entry requirements were set. these so called convergence criteria pertain to permissible values for inflation rates, interest rates, public deficits and public debts. the maastricht treaty does not hold the ultimate wisdom. economic theory has not yet advanced to a level where it can objectively and accurately determine the optimal size of public deficits and debts. it probably never will. the maastricht budgetary criteria, which are criticised from various sides - some arguing that the entry requirements are too stringent, others believing them to be too lenient - are based on practical experience and, put in a longer historical perspective, are too lenient rather than overly stringent. this is another reason why these criteria must be stringently applied. 3. from maastricht to amsterdam the last stage that i want to complete in this introduction, is the journey from maastricht to amsterdam. on 16 and 17 june, amsterdam will host the biannual european summit, where the maastricht treaty could well be transformed into the amsterdam treaty. it is worth mentioning to foreign guests present here this afternoon that, from a geographical perspective, maastricht is the last and only real mountain to be conquered on the road to amsterdam

more of the trading activity in our currency occurs outside our jurisdiction than inside it, a pattern that is common to most currencies. this reflects the role of international financial centres such as london, which retains a dominant role as a financial hub. other centres such as singapore and hong kong have made it part of their national “ business model ” to provide an environment conducive to major financial firms setting up to offer a full menu of financial services to the global investor community. most countries that are not themselves international financial hubs find that an increasing proportion of trading in their currency takes place “ offshore ”. 4 3. how has the exchange rate behaved? at the time of the float, the australian dollar against the us dollar was actually not very different from its current value ( graph 1 ). it was worth about 90 us cents in december 1983. that was down from its highest point in the 1970s under the fixed exchange rate system, of us $ 1. 4875. the trade - weighted index was 81 ( today about 72 ), down from a high of around 120. people forget how high the exchange rate was for much of our history. initially after the float, the exchange rate rose for some months before settling back. there was a further very distinct leg down beginning in early 1985. there was quite a lot of drama at the time – this was the era of credit rating downgrades and “ banana republics ”. i think remarkably, the decision was taken as the exchange rate was under upward pressure, only a matter of months after a discrete devaluation had been forced on a newly elected government by large capital outflows. figures from the bis triennial central bank survey of foreign exchange and derivatives market activity in april 2013. should this worry us? at one level it might be concerning that people elsewhere in the world take decisions that have a major bearing on the value of “ our ” currency. but decisions elsewhere in the world have a major bearing on the price of lots of things we care about : traded products of all kinds, the stock market valuations of our companies, the interest rate on government debt and so on. it is part and parcel of participating in the global economy and being open to foreign trade and capital flows that foreigners have a say in pricing the currency. they can and will do so whether the traders sit in sydney or singapore or london. that is a separate question from whether we would benefit from our firms offering more value added in financial services to the investors