Nick Garlaounis 1Global Economy in Meltdown - How is Australia Faring?
October 9th 2008 05:16
The global economy is in meltdown mode with more to come over the next little while. Sharemarkets are getting a hammering with many stocks losing more than 20% of their value since the global credit crisis took hold, there is little in the way of a shining light for the global economy so the question is, how is Australia fairing in these very unstable financial times?
Let's take a look at the Banking system firstly, it is hard to not notice that major global banking institutions have been hit hard with some even going into liquidation in the US primarily. The key difference between global banks, namely US banks and the Australian banking system is lending policy, the reason that the credit crisis occurred in the first place is the amount of home loans defaulting in the US.
The lending policy is the dividing line between sound business practice and the turmoil that the US banking system is now going through, the flow on effects are obvious. In Australia though the lending policy and prictices are far more stringent, specifically in relation to low doc home loans, this simply means home loans for the self employed market who are unable to provide evidence of income.
The Australian banking system is still very robust and Australia will be impacted although in general the economy will weather the storm and not necessarily follow suit in line with the US economy which needed a 700bn bailout only a week or so ago.
In comparison to the rest of the globe, the Australian banks are ranked number 4 on a global scale of banks out of a total of 134. Whereas the US and UK are ranked in the 40's. A vast difference and also comforting to know that Australian banks will not go into liquidation or need to be bailed out by the federal government which in turn would end up costing the tax payer anyway.
It is not all doom and gloom here in Australia, we are truly still the 'Lucky Country'.
Let's take a look at the Banking system firstly, it is hard to not notice that major global banking institutions have been hit hard with some even going into liquidation in the US primarily. The key difference between global banks, namely US banks and the Australian banking system is lending policy, the reason that the credit crisis occurred in the first place is the amount of home loans defaulting in the US.
The lending policy is the dividing line between sound business practice and the turmoil that the US banking system is now going through, the flow on effects are obvious. In Australia though the lending policy and prictices are far more stringent, specifically in relation to low doc home loans, this simply means home loans for the self employed market who are unable to provide evidence of income.
The Australian banking system is still very robust and Australia will be impacted although in general the economy will weather the storm and not necessarily follow suit in line with the US economy which needed a 700bn bailout only a week or so ago.
In comparison to the rest of the globe, the Australian banks are ranked number 4 on a global scale of banks out of a total of 134. Whereas the US and UK are ranked in the 40's. A vast difference and also comforting to know that Australian banks will not go into liquidation or need to be bailed out by the federal government which in turn would end up costing the tax payer anyway.
It is not all doom and gloom here in Australia, we are truly still the 'Lucky Country'.
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