The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Wayne Swan

Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

25 September 2008

NO.102

Government Welcomes RBA Financial Stability Review

I welcome today's release of the RBA's Financial Stability Review, which concludes that Australia's financial system is well-placed to withstand the current difficulties facing global financial markets.

This report reiterates that while Australia is not immune from global financial market turmoil, our financial system is better-placed than most countries to weather the storm.

The RBA highlights the strength of our financial sector, which is well‑regulated and well‑capitalised.

The RBA notes that "The Australian financial system is well-placed to weather the current difficulties in the global financial system. In contrast to many banking sectors around the world, the Australian banking sector continues to be highly profitable. The system is soundly capitalised and the banks have high credit ratings and relatively little exposure to US sub-prime related assets or to market risk from trading activity. Problem loans also remain low by both international and historical standards, although they have increased recently."

The RBA notes that the global financial system is experiencing the most challenging conditions for many decades and has prompted exceptional responses from central banks and the US Government.

The report highlights that while Australia is not immune from global difficulties, we do not face the same problems as the United States. Australia has not experienced the erosion in lending standards that occurred in the United States over recent years and the level of non-conforming loans in Australia is less than 1 per cent of all outstanding housing loans.

The RBA's review follows the International Monetary Fund's positive assessment of the strength of Australia's banking and regulatory systems and the Rudd Government's Budget settings, as outlined in its Article IV report on Australia, released yesterday.

The Government has been taking decisive action to boost Australia's defences to the international turbulence. We are implementing the Financial Stability Forum recommendations and encouraging their implementation internationally; supporting liquidity in the Government bond market to ensure our broader financial markets operate more effectively; and strengthening protections for depositors through the introduction of a Financial Claims Scheme.

In addition the Government is creating a single national framework for the regulation of consumer credit, including mortgages, to ensure that the kind of problems being faced in the US due to poor lending practices do not occur here.

The Government has been working with the Australian regulators and authorities in other jurisdictions to act against detrimental short selling practices and will be introducing legislation to improve disclosure of covered short selling in due course.

CANBERRA
25 September 2008