After an early career as an economist in Melbourne, Sydney, Oxford and Paris, he joined the Reserve Bank of Australia in 1979 and rose to become Governor from 1996 to 2006.

He moved to Sydney in 1970 on a short-term contract with the Reserve Bank of Australia to join a team building the first econometric model of the Australian economy.

[2] On taking up the position, he signed a memorandum of Agreement with Treasurer Peter Costello which introduced Australia's inflation-targeting monetary policy regime.

[3] The ten years during which Macfarlane was Governor was a period of good economic growth and low inflation, although the Asian financial crisis in 1997, the global recession of 2001 and an incipient housing price bubble in 2003 presented challenges.

Macfarlane has always been interested in history, and in 2019 published a purely historical work titled Ten Remarkable Australians: they made their mark on the world but were forgotten.