the outcome of numerous forces over long periods of time. 3. looking at aggregate information, or one aspect in isolation, can often be misleading. this is true when we are looking at the capital flows into and out of australia. the net flows, which are often the focus of analysis, conceal a lot of important information that is only evident if you look at the gross flows. 3 another example is thinking about the financing of the corporate sector, where the preference for debt versus equity funding varies considerably depending on the nature and size of the business. just looking at bond and equity financing in aggregate again conceals much of the interesting information. 4. stocks matter at least as much as flows. just as a disproportionate amount of analysis is partial rather than general, stocks are very often neglected in favour of flows, as on the price side, are levels rather than rates of change. 5. the financial system is always evolving – in both cyclical and structural senses. 6. – in terms of cyclical aspects, financial institutions currently have a better appreciation of liquidity risk than they did six years ago. but if history is any guide, at some point in the future, that appreciation is likely to wane ; for example, the lessons from the runs on some deposit - taking institutions and trusts in the early 1990s or the concerns about liquidity in sydney ’ s early days as a colony ( there aren ’ t too many around in the financial sector today who remember that ). – the financial system is also continuously evolving in a structural sense. there are a large array of financial products that simply didn ’ t exist two decades ago. in some cases, their arrival has not always been a good thing. in other cases, such as that of asset - backed securities, or going back a bit further, junk bonds, a new product arrived, the market grew too fast too quickly resulting in considerable dislocation, before settling down to be an important, but much smaller part of the financial landscape. the factors driving evolution are sometimes very similar over the decades, while some factors fade in importance and new drivers emerge. – the increasing size of superannuation funds has played an important role in influencing the shape of the financial sector in australia for the past couple of decades, and given its current size, is likely to continue to do so for the foreseeable future. – likewise, government financing arrangements, banking regulations and banks ’ liquid asset holdings continue to be strongly related. –

than for australia, so australia ’ s relative performance improved towards the end of this 50 - year period. while economic growth in australia was lower than for the oecd on average over the 1950s and 1960s, it was higher in the 1980s and 1990s, with the biggest advantage in australia ’ s favour occurring in the 1990s. alan blinder, “ hard heads, soft hearts : tough - minded economics for a just society ”, addison - wesley, 1987. e a boehm identified two recessions in the 1970s, the first in 1974 and the second from august 1976 to october 1977. see “ the usefulness and applications of economic indicator analysis ”, institute for applied economic and social research working paper no. 9, 1989. table 1 real gdp growth - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 4. 2 5. 3 5. 4 5. 2 3. 4 3. 5 3. 3 2. 6 3. 3 2. 1 this is a surprise to some people and one response is to query it on the grounds that our recent relatively buoyant economic growth could have been mainly the result of our faster population growth. table 2 examines this issue by taking out the effect of population growth and looking at real gdp per capita over the same five decades. on this basis, the recent relative improvement is now more pronounced than in the earlier table. the 1990s not only shows a pick - up in australia ’ s growth of real gdp per capita compared with the two previous decades, but it is the only decade in which australian gdp per capita has grown faster than the oecd area, and by an appreciable amount. table 2 real gdp growth per capita - average annual rate australia oecd 1950s 1960s 1970s 1980s 1990s 1. 8 3. 5 3. 3 3. 9 1. 7 2. 4 1. 7 1. 8 2. 1 1. 3 i do not want to suggest that our recent economic performance means that we have returned to a golden age such as we had in the immediate postwar period. nor do i wish to deny that there is still a backlog of remedial work to be done - our unemployment rate being an obvious example. but, on the other hand, we must be doing something right. our expansion so far in the 1990s has outlasted its predecessors in the 1970s and 1980s, and it is still going strong. we have withstood a difficult external shock, and should be able to sustain