The effect of the global financial crisis on Australia has been considerably less, compared to the other affected countries. The Australian economy has revealed better outcomes than most other developed economies, which experienced recessions and rises in unemployment. Also the Australia banks have managed to be profitable without requiring any capital injection from the Government.
The noticeable collision of the financial crisis on most Australian households was the large decline in equity prices, "which reduced the wealth of Australian households by nearly 10% by March 2009. However, since the trough In equity markets In March 2009, the local market had recovered half of Its decline by the end of November 2009. " The Australian dollar also depreciated rapidly and sizeably as the crisis intensified, declining by over 30 per cent from its July 2008 peak.
Around the time of the Lehman ankruptcy, conditions in the foreign exchange market were particularly illiquid, prompting the Reserve Bank of Australia (RBA) to Intervene In the market to enhance liquidity. Since March 2009, as fears abated, the Australian dollar largely recovered, reflecting the relative strength of the Australian economy. The credit and money markets in Australia have also proven to be more resilient than in many other countries, necessitating considerably less intervention by the RBA than occurred in many other countries.
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Impact of Global Financial Crisis
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In large part this reflected the health of the Australian banking system. The Australian banks had almost no holdings of the "toxic" securities that severely affected other global banks. The health of the Australian banking system facilitated the effectiveness of the monetary and fiscal response, particularly by allowing much of the large easing in monetary policy to be passed through to interest rates on loans to households and businesses, in stark contrast to the outcome in other developed economies.
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