Financial implications

hile the Australian economy is exposed to certain degree of credit tightening, the economic position of the financial institutions in Australia are quite different from the US firms. The economy of Australia is not experiencing similar degrees of market severity and the overall climate is more favorable than other nations who are directly impacted by the US economy. The economic strengths of Australia is observed in its rising exports of commodities across the globe.

The country is experiencing an export growth rate of 6. 9 percent annually over the last few years. The US recession has slowed down exports to some extent but the steady rise in demand for exports of metals, minerals, and energy indicates positive economic growth. The boom in trade has been affected by the impact of the global financial crisis to certain degree that has led to inflationary market trends and a small setback to national productivity.

Glenn Stevens, the Governor of the Reserve Bank of Australia stated in his address to the House of Representatives on 4th April 2008 that “by restraining demand for a while, we can secure a global reduction in inflation over the period ahead, then an important foundation of Australia’s good macroeconomic performance over the past decade and a half will remain in place. That in turn, will offer the prospect of good sustainable growth into the next decade. ” Conclusion Financial and banking institutions across the globe are skeptical about the financial implications of the home loan crisis in US.

It is estimated that the global economic growth will drop to 3. 7 percent in the year 2008 (World Economic Outlook report, 2007). The World Economic Outlook Report, 2007 states that “financial market conditions are likely to remain extremely difficult until there is greater clarity about the extent and distribution of losses on structured securities, until core financial institutions are able to rebuild capital and strengthen balance sheets, until the framework for structured finance and related investment vehicles is made more robust, and until the risk of widespread deleveraging and associated asset price declines is more clearly contained.

” The businesses and households across the globe are feeling the effects of higher rates of interest triggered by the global financial turmoil but several economies like Australia are coping well with regulatory policies and measures to control inflationary pressures and promote economic growth and productivity. References: 1. World Economic Outlook Report, 2007 – Chapter 1 “Global Prospects and Policies” 2. Economic Update and stocks for your stocking – December 2007 Wilson HTM Investor Group Report

3. Shane Oliver (July 2007) – “The US sub prime mortgage crisis and Australian investors” – AMP Capital Investors Report 4. Glenn Stevens (April 2008) – “Reviewing the Australian economy’s performance” – http://www. bis. org/review/r080404c. pdf – accessed on 19th May 2008 5. Wayne Swan (March 2008) – “Global market turbulence and the Australian economy” – http://www. treasurer. gov. au/DisplayDocs. aspx? doc=speeches/2008/006. htm&pageID=005&min=wms&Year=&DocType= – accessed on 19th May 2008

6. Randall Dodd (December 2007) – “Subprime: tentacles of a crisis” International Monetary Fund – http://www. imf. org/external/pubs/ft/fandd/2007/12/dodd. htm – accessed on 19th May 2008 7. The Sydney Morning Herald Business article – “US home loan crisis” – http://www. smh. com. au/news/business/market-hit-by-us-home-loan-crisis/2007/03/14/1173722507479. html – accessed on 19th May 2008 8. Business Standard (March 2008) – “ A crisis? Or a mere recession?

” – http://www. mayin. org/ajayshah/MEDIA/2008/recession_or_crisis. html – accessed on 19th May 2008 9. BBC News (August 2007) – “Counting the cost of the home loan crisis” – http://news. bbc. co. uk/2/hi/business/6970287. stm – accessed on 19th May 2008 10. Economic Research Service Article (September 2007) – “US trade growth: a new beginning or a repeat of the past? ” – http://www. ers. usda. gov/AmberWaves/September07/Features/USTrade. htm – accessed on 19th May 2008