Mike Smith, CEO, ANZ Bank spoke this morning at the China Business Summit hosted by the City of Sydney.

“It’s tough out there, particularly in the financial centres of New York and London.” Sub-prime write-downs now exceed $140 billion (write-downs are bank-speak for losses). This exceeds the GDP of New Zealand. The first bank run in a century occurred in Britain; Northern Rock bank was nationalised this week.

Liquidity is placing pressure on corporate and there is increasing volatility in share markets. “There is no longer a disparity between what is good and what is bad.” Australian banks are being treated with the same discounts as USA and European banks – yet Australians

“Credit worthiness is like oxygen – you don’t notice it when it’s around,” said Warren Buffet. Perhaps he should have said you notice it when it’s not around.

In this environment sovereign funds are welcome relief – and Australia needs to consider carefully policies on these funds.

The Australian economy and banking centre are weathering the current financial storm better than any Western economy. The Asian markets are less dependent on USA so slowing will be modest across the region. Asia is in a much stronger macroeconomic position that in was a decade ago.

The importance of China to Australia’s future…

Today we are at another turning point – by 2015 China will once again be the world’s largest economy. In the 19^th century we had the European century. The last was the American century. We are now in the China century. It is vital for Australia to embrace China and recognise our future must be linked to China.

Our future success for the economy and our businesses is liked to China and to Asia.