. again, a large current account deficit is often associated with a currency crisis, but there are enough important exceptions to question whether this would be a useful indicator of an impending currency crisis. for example, neither indonesia nor korea had large current account deficits in the 1990s ( including in 1997 ), nor did either the united kingdom or italy in 1992. the celebrated case in the opposite direction is singapore, which ran a current account deficit which averaged 15 per cent of gdp for the decade of the 1970s without a currency crisis. as you may have noticed, i have not mentioned any of the economic characteristics that have received so much attention in discussions of the current asian situation. these include longstanding structural features such as soundness of the domestic banking system, the transparency of business relationships, the degree of government involvement in private investment decisions, or the quality of bank supervision. while these are important, they are important in a different way. deficiencies in these areas clearly cannot be the cause of the recent currency crisis in asia, because these deficiencies have been around for decades. they did not deter international capital from flowing in year after year and, therefore, could not be the cause of the change of direction in 1997. they are important, not because they cause a currency crisis, but because they provide an environment where a currency crisis can lead to a severe economic crisis. severe economic crises whether a currency crisis leads to a severe economic crisis or not depends on two factors - how far the currency falls, and how resilient the economy is to a lower exchange rate and higher interest rates. ( a ) the size of the depreciation this may sound as though it is a small diversion from the main theme, but it is not. it is quite possible that an exchange rate may fall by an amount much greater than anyone expected on the basis of ex ante information ( anyone can always make up an ex post justification ). this should not surprise us because no - one has yet been able to find a satisfactory explanation for movements in the exchange rate. that is, no - one has found an equation linking the exchange rate to various economic variables that is good enough to yield forecasts that outperform crude rules of thumb. we know that certain factors, such as those listed in the previous section, are associated with falls in the exchange rate, but we do not know whether the fall will occur this month or in two years, or whether it will be 10 per cent, 20 per cent or 80 per

. there is a degree of irreducible uncertainty here and hence the possibility of further financial market volatility at some point. overall though, it seems very likely that global interest rates will still be quite low for quite some time yet. bis central bankers ’ speeches for australia, we cannot, of course, determine our terms of trade or other forces in the global economy. we can only adjust to them. the record of adjustment in recent years is good. we negotiated the financial crisis without a major financial crisis of our own or a big downturn in economic activity. we negotiated the first two phases of the resources boom without major inflationary problems, and are part way through our adjustment to the third phase – so far without a major slump in overall economic activity. there is still a pretty good chance that we will come out of this episode fairly well, and much better than we came out of previous episodes of this type. i now turn briefly to another area of the bank ’ s responsibilities, namely the payments system. the new payments platform ( npp ) will enable real - time, data - rich payments on a 24 / 7 basis for households, businesses and government agencies. the payments system board, having worked to facilitate the process of the private sector coming together to drive this project, supports the industry ’ s efforts. the reserve bank itself is making good progress in its own part in this project. in the card payments area, the bank has announced a review and we released an issues paper in early march. among other things, the review contemplates the potential for changes to the regulation of card surcharges and interchange fees. it provides an opportunity to consider some of the issues raised in the financial system inquiry. as usual, the bank has been consulting widely, including via a roundtable in june that included representatives from over 30 interested organisations. the payments system board has asked the staff to liaise with industry participants on the possible “ designation ” of certain card systems. a decision to designate a system is the first of a number of steps the bank must take to exercise any of its regulatory powers in respect of a payment system, but does not commit it to a regulatory course of action. the payments system board will have further discussions on the case for changes to the regulatory framework at future meetings. in the event that the board were to propose changes to the regulatory framework, the bank would, as usual, undertake a thorough consultation process on any draft standards. in our financial stability role