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
the rate at which developed economies
swift actions and stimulus plan are major
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
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
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
shocks for financial markets may occur,
The difference between Australia and other developed econo-mies was
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
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
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.
i n t e r n at i o n a l bus i n ess r e v i e w