public ’ s concern is directed at a couple of industries where surcharges appear to be well in excess of acceptance costs, at least for some transactions. the bank considers that its decision to allow surcharging of card payments in 2002 has been a valuable reform. it allows merchants to signal to consumers that there are differences in the cost of payment methods used at the checkout. by helping to hold down the cost of payments to merchants, the right to surcharge can help to hold down the prices of goods and services more generally. the bank made some incremental changes to the regulation of surcharging in 2013, but to date these have had a relatively limited effect on the cases of surcharging that most concern consumers. our current review will consider ways we can retain the considerable benefits of allowing merchants to surcharge, while addressing concerns about excessive surcharges. one element of this might be, as the financial system inquiry suggests, to prevent surcharges for some payment methods, such as debit cards, if they were sufficiently low cost. this would mean that in most cases consumers would have better access to a payment method that is not surcharged, even when transacting online. other options being considered are ways to make the permissible surcharge clearer, whether through establishing a fixed maximum or by establishing a more readily observable measure of acceptance costs. the capping of card interchange fees is also now a longstanding policy and, we think, a beneficial one. nonetheless, it is important to ensure that it continues to meet its objectives. caps were put in place in 2003 based on concerns that interchange fees in mature payment systems can distort payment choices and, perversely, be driven higher by competition between payment schemes. as suggested by the inquiry, the bank ’ s review will consider bis central bankers ’ speeches whether the levels of the current caps remain appropriate. we know, for example, that lower caps have now been set in some other jurisdictions. but there are other elements of the current regime that also warrant consideration. for instance, while average interchange fees meet the regulated caps, the dispersion of interchange rates around the average has increased significantly over time. the practical effect of this is that there can be a difference of up to 180 basis points in the cost of the same card presented at different merchants. this problem is aggravated by the fact that merchants often have no way of determining which are the high - cost

( presumably one should not rely much on luck! ). 17 the truth, however, is that our capacity to predict even the near - term future is limited. grappling with the question of whether we are in a new epoch – and pricing accordingly – is an even bigger ask. following world war ii, the main fear among the economics fraternity in many countries was of another depression and deflation akin to the 1930s, as the demand provided by defence expenditures tailed off and military personnel re - entered the civilian labour force. 18 in fact, partly as a result of that policy preoccupation, the economy expanded strongly through the 1950s and 1960s, and it was inflation, not deflation, that ultimately turned out to be the problem – a problem which then took quite some time ( in australia ’ s case, two decades ) to sort out. that should, if nothing else, make us cautious about long - term prediction. but the end of the long post - war boom also highlights something else. we can see now that during that period, businesses, wage earners, industrial tribunals and policy - makers gradually adapted their behaviour as they came to assume that the long expansion could continue indefinitely. as they did, they sowed the very seeds of the expansion ’ s demise. the oil price rises of the mid 1970s were a shock, but the other problems on the supply side of market economies had been developing for some time. and that, perhaps, points to the relevant question to pose at present. it is possible that the world is in for another period of stability like the 1950s and 1960s. but even if it is, even if some of the “ risks ” of economic life, insofar as we can quantify them, are actually lower, or can be better managed, people will adjust to that. so the question is : might not the behaviour of borrowers, lenders, investors and price setters, in response to perceived lower risk, itself work to increase the probability of instability in future? this, of course, is the question posed about the tendency of households in some countries ( including australia ) to take on much more debt. in enjoying – rationally, based on lengthening experience – the opportunities afforded by a more stable macroeconomic environment and a more complete and liquid set of capital markets, are they in the process gradually impairing the very resilience to economic shocks which helped to produce the stability in the first place? it is not saying anything