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Macfarlane praises banks for crisis handling

Posted December 4, 2008 08:50:00

Former Reserve Bank governor Ian Macfarlane says Australia is coping well with the global credit crisis.

Mr Macfarlane was Australia's chief central banker from 1996 to 2006 and delivered the 2008 Lowy Institute lecture in Sydney last night.

He says Australia has been spared the worst of the financial crisis, thanks largely to the banks.

"They didn't fall victim to the urge, other than a very tiny fringe, they didn't feel the need to prove how clever they were by investing heavily in instruments," he said.

"So I think in Australia's case more credit should go to the banks, but some credit to the regulators."

He says it would have been difficult for forecasters to have predicted the magnitude of the global credit crunch.

"The events of the last year have been quite astonishing and the capacity to make forecasts of events that are outside the range of previous experience is extremely limited," he said.

Mr Macfarlane described the current financial crisis as the worst of its kind in 20 years.

"We're almost incapable, biologically incapable, of making forecasts of events that are outside the range of our lifetime experience and I think some of the events of 2008 have certainly been of that nature."

Tags: business-economics-and-finance, economic-trends, banking, international-financial-crisis, australia