Comments on: Australia and the Global Financial Crisis

By: Rachael

Rachael — Sun, 04 Sep 2011 21:38:30 +0000

Thanks!

By: Stubborn Mule

Stubborn Mule — Sun, 04 Sep 2011 02:56:34 +0000

Australia was always going to be better placed in the face if the GFC than many other countries: resources exports to China helped prop up the economy and our banks had much healthier balance sheets (very little in the way of “toxic assets”). Still, the government did respond with stimulus spending (like the $900 “flat screen” windfall for taxpayers) and provided a government guarantee for the banks: although their assets were pretty good, they still depended a lot of international wholesale markets for funding and no-one wanted to see a run on a bank.

By: Rachael

Rachael — Sat, 03 Sep 2011 08:33:13 +0000

Can you please explain to me how Australia responed to the GFC? What did the goverment do to save Australia from dying?

Please help me! im 13 and i need to know this for a school project!
:)

By: Stubborn Mule

Stubborn Mule — Mon, 04 Oct 2010 04:34:36 +0000

There was an effect for small businesses: bank credit was harder to come by and more expensive for a while. However, since Australia has managed to bounce back to growth in a way the few other developed countries around the world have managed, the effect on small business here is starting to look fairly mild compared to businesses in the US, UK and elsewhere.

By: An Amateur

An Amateur — Mon, 04 Oct 2010 04:18:27 +0000

Hi Mule,

Do you think Australian small businesses were really affected by the global financial crisis?

By: Reduce, Re-use, Recycle | A Stubborn Mule's Perspective

Reduce, Re-use, Recycle | A Stubborn Mule's Perspective — Wed, 23 Sep 2009 08:33:46 +0000

[...] Australia and the Global Financial Crisis [...]

By: Shoots Are Greener in Australia? | A Stubborn Mule's Perspective

Shoots Are Greener in Australia? | A Stubborn Mule's Perspective — Mon, 15 Jun 2009 23:51:16 +0000

[...] have written before about Australia and the global financial crisis, looking at the extent to which we have been better insulated from the worst of the crisis than the [...]

By: stubbornmule

stubbornmule — Thu, 14 May 2009 00:27:47 +0000

@Tom: it does depend on how you measure the top 20 banks, but I take your point. The current crisis creates all sorts of opportunities. Fortune favours the brave, but I'm not sure how many are brave enough to take this opportunity!

By: Tom

Tom — Wed, 13 May 2009 08:04:17 +0000

This is an opportunity for australia not to be missed. Our banks are in the top 20 of the world most financially sound banks, there is a definite lack of investment everywhere (bar for government investment) so why not take this opportunity to turn around our high CAD (current account deficit)? Lets reverse the trend of more investment coming into australia than is going out. Decrease our net foreign debt and equity by increasing the inflow of funds to australia through profits and debt repayments. Avoid the debt trap we are inevitably moving towards while we still can.

The financial giant that is america has been momentarily staggered, lets take advantage while we still can.

By: stubbornmule

stubbornmule — Fri, 08 May 2009 21:06:30 +0000

@kelly: I do think that the experience of the financial crisis supports changes to regulations.

Banks are a bit different to other businesses as they form part of the mechanics for the operation of our economy. If, say, a textile firm went out of business it may be a shame and society may want to provide some kind of assistance, financial or otherwise, to workers who have lost their job. But the failure does not threaten the broader economy. The same is not always true of banks, particularly if they are large or a number are threatened at once, as we have seen recently. In this case failure could have far broader repercussions. This has been understood for a long time, which is why banking is already subject to extensive regulation. But the regulation of banks is effectively an ongoing experiment. The rules are designed based on problems or near misses that have been observed over the years. The latest crisis show that we have not yet got the mix quite right. Two key lessons are the importance of preventing individual banks from becoming “too big to fail”. First, since it will never be possible to completely eliminate risk, we should at least have an environment where a single institution could be allowed to fail, like a textile firm or any other sort of business, without threatening the whole system. Second, it has become evident that it is not only traditional retail and commercial deposit-taking banks whose failure can threaten the economy. The same can be true of the so-called “shadow banking system”, comprising businesses such as investment banks, hedge funds and the like. Changes to regulation should therefore extend greater restrictions on the activities of these sorts of firms.

Even so, the new regulations will, of course, not be perfect. But they will, with luck, represent an improvement in this ongoing experiment.