'House prices unlikely to fall 30pc' By Ed Logue AAP December 03, 2008 09:31pm http://tinyurl.com/5a9m5k AUSTRALIA'S toughest financial time occurred around 20 years ago even though the world is experiencing its worst economic crisis in the deregulation era, a former central bank governor says. Ian Macfarlane, the predecessor to Glenn Stevens as Reserve Bank of Australia (RBA) governor, said the current global financial crisis was the worst internationally since financial markets were deregulated, but this ranking did not apply to Australia. And he said it was "highly unlikely" that house prices across Australia would fall 30 to 40 per cent as some commentators had predicted. "The Australian housing system is very different, particularly with the US and the UK," he said. Within the sector there had been problems, but there there were fundamental differences why prices would not plummet, Mr Macfarlane said. "We had a big problem back in 2003, with house prices going up over 20 per cent, house lending going up 20 per cent, with 40 per cent of that for investment housing," he said. "We are in better shape, and of course we don't have overbuilding. "We have never seen such a freezing up of lending between the banks before and we have never seen a situation where in the US, the UK and Europe so many banks and other financial institutions have had to be fully, or partially, nationalised in order to prevent their collapse.' Mr McFarlane said Australia's worst financial crisis in living memory was the asset price boom of the late 1980s and "its bursting in the early 1990s," he told the 2008 Lowy Lecture audience in Sydney tonight. Mr Macfarlane's topic was `Australia and the International Financial Crisis'. He said the nation's regulators had kept the Australian financial system healthy. "Truthfully, the Australian banking sector is the best banking sector in the OECD (Organisation for Economic Co-Operation and Development)," he said. Mr Macfarlane was asked if he was lucky in finishing his 10 years as governor of the central bank in 2006, before the onset of the global financial crisis. "A lot of people say to me in the street as they are walking past `good timing mate'", he said. One role he was glad not to have was one of an economic forecaster, Mr Macfarlane said. "Anyone who has tried to do that if that was their only source of income, they would have gone broke," he said. And he dismissed the credibility of those who forecasted the current financial crisis. "Everyone who predicted what has happened this year has been predicting it for 10 years." --

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