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policy be adopted in the near future, if

banks and credit unions, but also life and

The need to pay off debt and

we were in the recovery phase.

general insurance companies.It oversees

place suitable reform on the financial

about three quarters of Australia’s total

sector will be issues which will affect

financial assets.

the rate at which developed economies

While

the

current

Government’s

swift actions and stimulus plan are major

recover.

Also,

Australia’s

close

factors for the mildness of the Australian

As a result Australian banks did not

recession, the actions of the previous

partake in risky over-leveraging or issue

economic ties with China have helped

administration

discounted.

sub-prime mortgages like their foreign

it recover quicker, as China continues

Under John Howard, who was Prime

counterparts. While Australian banks

to experience increases in exports and

Minister from 1996 to 2007, firm economic

did invest in American institutions (and

domestic demands for energy.

policies paved the way for the Australian

experienced losses), the recent reporting

In essence, for an economy to fully

economy and financial system to be more

period has shown that they now on their

recover from the global downturn it

resistant to failing markets elsewhere.

way to healthy profits. On February 16th,

needs to not only withstand but have

Furthermore, a large stimulus package

Australia’s second largest bank reported

the ability to adapt to future downturns.

is not the sole answer to economic

a 33% increase in profits for the first

Structural

cannot

be

changes,

appropriate

While the current Government’s swift actions and stimulus plan are major factors for the mildness of the Australian recession, the actions of the previous administration cannot be discounted. downturn. If it were the case, the other

quarter, as they sold more loans and had

investment in the public sector and

developing economies would be following

less defaulting customers.

an independent Reserve Bank are all necessary for this.

Australia’s improvements. For example,

Another positive economic factor,

Aspirin cannot fix an injury resulting from

apart from the strong labor force and

years of poor health. Just as bones need

banking sector, is the national budget.

echoed the positive employment news

exercise and good nutrition, the economy

The Howard years were known for their

saying that “what people have called

requires support (beyond stimulus) to

budgetary surpluses, with the public

the global financial crisis” has passed.

soften cyclical and non-cyclical shocks.

national debt being fully repaid and

He noted that while future adverse

privatization

shocks for financial markets may occur,

The difference between Australia and other developed econo-mies was

of

government-owned

Treasury

Secretary,

Ken

Henry,

their impact will not be as widespread

companies occurring. This is important in noting since

and harsh as that of 2008 and 2009.

sector prior to the crisis. The Australian

the United States and other European

With the positive employment figures it

financial sector had undergone regulatory

countries already had large budget

seems that Australia is heading towards

reform as a result of the previous Howard

deficits before the crisis hit. Hence their

to

government.The

significant

Stimulus packages, running into the

economy. Unfortunately, we will only

development was the founding of the

hundreds of billions, added further strain

find out if we are truly “in the clear” in the months to come. iBR

precisely the healthy state of the banking

most

Australian Prudential Regulation Authority

to their accumulating debt. In addition,

(APRA) in 1998. It combined the functions

significant parts of their stimulus spen-

of 11 previous agencies to supervise not

ding were used to bail out banks, which

only deposit-taking institutions such as

Australia did not have to do at all.

an

overall

improvement

i n t e r n at i o n a l bus i n ess r e v i e w

in

the

65

International Business Review - Spring 2010  

The Spring 2010 edition of the IBR.

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