past year, the stock market, as measured by the asx 200 accumulation index, has returned about 25 per cent. 1 the median price of a dwelling in australia has risen by about 8 per cent over the past 18 months, reversing a previous decline. overall, the net worth of australians has increased by around 15 per cent, or more than $ 800 billion, since the end of 2011. it is not yet clear to what extent, or when, these more favourable trends in “ confidence ” will translate into intentions to spend, invest and employ. the pace of new dwelling construction is starting to respond to higher prices in the established property market, as we need it to. but at this stage, the available information suggests that broader investment intentions in the business community remain subdued. it may be a while yet before we can expect to see conclusive evidence of a change here. in the interim, some commentators have taken the view that the property market dynamics are worrying. my own view, thus far, has been that some rise in housing prices is part of the normal cyclical dynamic, that it improves the incentive to build, and that a price rise reversing an earlier decline probably isn ’ t something to complain about too quickly. moreover, credit growth, at between 4 and 5 per cent per annum to households, and less than that for business, does not suggest that rising leverage is so far feeding the price rise. hence it has been a little too early to signal great concern. there are, however, two caveats. the first is that, notwithstanding the above comment, credit growth may pick up somewhat over the period ahead. so this is an area to which we will, naturally, pay close attention. secondly, while overall credit growth remains low at present, borrowing is increasing quite quickly in some pockets. investor participation in housing in sydney, in particular, is becoming noticeably stronger. over the past year, the rate of finance approvals for this purpose has increased by 40 per cent. we have certainly experienced higher rates of growth of finance than that in the past, and it may be that we are seeing some catch - up from a delayed initial response to fundamentals favouring more investment in housing. nonetheless, as this activity continues, lenders and borrowers alike would be well advised to take due care. it is very important that strong lending standards remain in place, and that decisions be based on sensible assumptions this index, by the way, exceeds the 2007 peak, unlike

alan greenspan : international financial risk management speech by mr alan greenspan, chairman of the board of governors of the us federal reserve system, before the council on foreign relations, washington, dc, 19 november 2002. * * * today i would like to share with you some of the evolving international financial issues that have so engaged us at the federal reserve over the past year. i, particularly, have been focusing on innovations in the management of risk and some of the implications of those innovations for our global economic and financial system. fostered by a lowering of trade barriers, cross - border exchange of goods and services over the past half century has increased far faster than world gross domestic product. but what is even more remarkable is how large the scale of cross - border finance has become, relative to the value of the trade that it finances. to be sure, much global finance reflects growing investment portfolios, some doubtless with a speculative component. but, at bottom, such finance is a central element of the systems that support the efficient international movement of goods and services. we strongly suspect, though we do not know for sure, that the accelerating expansion of global finance may be indispensable to the continued rapid growth of world trade in goods and services. it appears increasingly evident that many forms and layers of financial intermediation will be required if we are to capture the full benefit of our advances in technology and trade. indeed, the seemingly outsized implicit compensation for risk associated with many investments worldwide suggests the potential for a far larger world financial system than currently exists. among most of the large world trading economies the bias against investment in foreign assets is apparent in the still - high correlation between domestic savings and domestic investment. in decades past, risk was perceived to increase with distance. a paucity of information and surplus of regulation discouraged the cross - border movement of funds. even today, with regulatory bars lowered and information and access much enhanced, bias against cross - border investment remains high. however, the continuous probing for enhanced returns, unless inhibited by governments, seems poised to create a much larger global presence of financial linkages in all our economies. as in all aspects of life, expansion of one ’ s activities beyond previously explored territory involves taking risks. and risk by its nature has carried, and always will carry with it, the possibility of adverse outcomes. accordingly, for globalization to continue to foster expanding living standards, risk must be managed ever more effectively as the century unfolds. the development of