foreseeing any slowdown in growth in 1998 is because of the asian crisis there was nothing in the domestic economy that pointed in that direction - in fact, it pointed to higher growth. i suspect that in the future evolution of our policy, asia will be the major influence. as you know, the board of the reserve bank met on tuesday and did not make any change to the setting of monetary policy. there had been some speculation over the preceding month that we might ease, but the majority of observers expected no change. our on - balance view is the same as the majority of outside observers : that is, we judged that the present setting is the right one. as we see it : • the present stance of monetary policy provides a low interest rate environment which is working to support, rather than restrain, growth. credit is readily available, borrowers seem to regard current interest rates as attractive, financial wealth is rising, as is private sector leverage. • developments in the exchange rate and interest rates charged by financial intermediaries since the last reduction in the cash rate in july last year have worked to magnify the effects of lower official rates. the exchange rate has come down against major currencies, and competition among banks has reduced interest rates to business and personal borrowers. • the most likely outcome over the next 12 months at the present policy setting is for inflation to return to its target range and for domestic demand to remain at or above trend growth. with a significant reduction in net exports, gdp will probably grow below its trend rate, but some growth slowdown in the short run is an unavoidable result of the external shock. • our measured approach to date has served us well in that it has maintained confidence in australian financial markets. that, of course, does not rule out further changes in policy, but it does impose a constraint in that it means monetary policy has to be adjusted credibly. we do not wish to jeopardise australia ’ s current good international standing or revive memories of when australia was regarded as a “ boom and bust ” economy. we gain a lot from our current reputation for stability - not only does it reduce our borrowing costs, but we can raise equity more cheaply, and we have become a more attractive place for direct foreign investment. of course, we recognise that it would also be a mistake to stick too long to a setting of policy in the name of stability if there were good reasons to move. we have to be

the regulatory reforms that have already been broadly agreed, but being wary of adding further reforms to the work program. absent some major new development, which brings to light some major reform need not hitherto visible, to task the regulatory community and the financial industry with further wholesale changes from here would risk overload. lest this be considered too weak a position, let us remember how much is being attempted. and since we are already seeing the need to “ tweak ” some earlier agreed proposals, it is surely clear that the details of implementation should increasingly be our focus over the next few years. the g20 will need to remain open to the possibility – the likelihood even – that as experience is gained with implementation and we grapple with the inevitable difficulties, and as we learn more about how the financial the relevant standards are the fsb ’ s key attributes of effective resolution regimes for financial institutions. work is also underway by cpss - iosco to establish how best to apply the key attributes to financial market infrastructures. bis central bankers ’ speeches system is likely to operate in a new world, we will want to make occasional adjustments to the rules. none of that ought to be seen as a retreat from the high level objectives that have guided efforts to date : the desire for a more stable, more resilient and simpler financial system, that is better able and more inclined to play its “ handmaiden of industry ” role and better able to withstand failures of individual institutions. but in pursuing these goals, it is important that we : • strike the right balance between more regulation and more effective enforcement of existing regulation. inadequate enforcement and supervision was as big a problem as deficient rules • recognise the cross - border aspects of the financial system, with the associated need for cooperation and, yes, compromise. recognition of the legitimate interests of smaller markets is clearly of importance to australia but many other jurisdictions as well. this often coincides with the role of pushing for a principles - based approach instead of a one - size - fits - all heavy - handed, rules - based approach. it may also involve working to develop a “ regional voice ” on some issues • consider the combination of reforms in their entirety, and keep a lookout for unintended consequences. given the breadth and speed at which reforms have been introduced in recent years, careful analysis of how the various initiatives will interact is becoming more important. keeping the regulatory structure fit for purpose across a broad range of jurisdictions around the world is in fact a