adelaide bank, the new entity has assets of around $ 50 billion, and is australia ’ s 11th largest bank. 1 though small in market share, its branch presence is considerably larger. if we were to compile a list of financial institutions of the second half of the 19th century, we would find that few of the names would be familiar ones. not many entities of that time are still in existence today. our major banks, of course, have a long history, in some cases dating back to the early convict era. but a great many financial institutions of the 19th century, particularly victorian building societies, succumbed to one or other of the busts that occurred in the 1890s, the 1930s and the 1990s. the 1890s episode was a particularly severe depression in victoria, with a collapse in land values and widespread closures of financial institutions. nearly half the building societies ranking based on banks ’ resident assets in australia. closed. this, as always, followed a period of extreme euphoria. consider the way the historian michael cannon describes the general scene in melbourne in the 1880s : the land mania of the 1880s took two main forms. the first was based on a plethora of building societies, whose optimistic officials believed that every family in the colony could simultaneously build their own house, keep up the payments through good times and bad, and support an army of investors who were being paid high rates of interest for the use of their money. the second form of mania was the deeply - held belief that it was impossible to lose money by “ investing ” in land – a belief which persists to the present day. 2 those words, penned in 1966 about an event a century ago, carry a more than faint echo of more recent times in other parts of the world. if we may paraphrase cannon, too many of the world ’ s major financial intermediaries thought that loans of dubious quality, originated by salespeople they knew little about, to borrowers whose credit standing, to the extent it was known, was very poor, could be sold in ever increasing quantities to investors looking for aaa security. one day the music stopped, as it always does, and they were left standing. the 1890s were tough for the city of bendigo, as for most of victoria. a number of banks in the city closed their doors. but its main building society remained sound. “ the bendigo ” had not ventured as far into melbourne real estate as others, nor was it as highly leveraged.

i j macfarlane : overview of the australian economy opening statement by mr i j macfarlane, governor of the reserve bank of australia, to house of representatives standing committee on economics, finance and public administration, warrnambool, 6 december 2002. * * * i would like to endorse the remarks of the chairman and say what a pleasure it is to be in warrnambool, for the second hearing to be conducted outside the sydney - melbourne - canberra triangle. the first was in wagga wagga, and i remember at the time suggesting that the second should be a little further away from canberra. warrnambool passes that test and is an important agricultural and tourist centre, so it is a fitting venue for this meeting. i would also like to thank the mayor of warrnambool, councillor james nicol, for his hospitality in hosting a civic reception for the committee and the members of the bank appearing before it. i would like to start the substance of this statement by observing that in the six months between this hearing and the previous one in may quite a lot has changed, and this has had an important influence on our judgment about what we have needed to do with monetary policy. this change has happened relatively steadily, with the result that the financial markets and the public more generally have had no trouble in adjusting to the changed outlook. we have assisted, where we thought necessary, by way of several speeches and articles on the subject over the past six months ; they have probably helped at the margin, although i think the public was not having any difficulty in recognising the changing outlook as it unfolded. that being so, it could be argued that there is nothing further to add on the subject. however, i am very aware of the fact that i gave some quite frank indications about the expected future direction of monetary policy at the previous hearing, and that those indications have not been followed through. so i would like to place on the record before this committee another account of the changing circumstances, even at the risk of being accused of going over old ground. in may i said to this committee that since the australian economy was behaving normally, and the world economy was getting back to normal, unless unforeseen developments intruded, we should continue the process of getting real interest rates back to normal, while all the time carefully examining incoming data, both from here and abroad, to ensure that developments remained on track. we did continue the process of getting