KEY POINTS:
The head of one of Australasia's largest banks, the ANZ, has warned that another Asian crisis could be looming.
John McFarlane, the Melbourne-based CEO of the ANZ Group, agreed with most other speakers at the Action Asia summit in Auckland this week that India and China's economic boom was undoubtedly a huge opportunity for businesses in this part of the world.
But he also warned there was a downside - and that was the risk of the bubble bursting.
Economic indicators were pointing to "a bit of a bubble developing", he argued.
"You would probably conclude that the Shanghai stock exchange is on the verge of overheating. If you look backwards in time it's not that long ago we had an Asian crisis."
In fact, only one country had fully recovered since the Asian crisis, and that was the Philippines, he noted.
"Asia is not as hot a place [now] as it was at that time."
However, the possibility of a softer landing than in 1997-98 was much stronger, he said, given that most Asian currencies had since appreciated "very substantially".
"If there is an issue, notwithstanding the opportunities, these countries are in a very good position to withstand any downturn - far better than they were in those years."
The issue was whether recent investors would be able or willing to stick it out for the long term. "I'm not worried about the long run, but what you would worry about is if you've invested, is your money going to be okay?"
McFarlane, who was previously based in Hong Kong with Standard Chartered Bank, argues that his company knows Asia better than most, given that it is the largest Australian investor in China.
He admitted he was puzzled by the private equity boom, given that most companies were currently relatively expensive.
"Why is it that during the Asian crisis we didn't see people buying very cheap assets? You buy socks on sale. Why don't we buy companies when they're on sale as well? It strikes me as one of the odd things."
That said, New Zealand and Australia still faced "one of the greatest opportunities open to us at any point in our history" in Asia, provided we were prepared to invest for the long term, he said.
"Absolutely the future of New Zealand and Australia economically - but also increasingly politically - is with Asia.
"In that respect, the weakness is we're not big enough, or strong enough, to play there today."
McFarlane also argued that New Zealand and Australia were setting their economic sights too low.
He joked that Australian Treasurer Peter Costello was unlikely to thank him for saying so, but instead of comparing ourselves to the OECD, we should be comparing ourselves to Asia.
It was a "major strategic issue" facing the two countries, he said.
"Do we want to start to play the big game? By implication we are comparing ourselves to the wrong group."
