We all know American and their tendency to exaggerate...  if it affects them it affects the whole world...  they have a baseball competition and they have the gall to call it the World series...

Well the GFC didn't affect the whole world and its effects were varied throughout Global markets depending on a country's exposure to the US and the resiliency of their own financial systems and economies.

We all know Rudd and Labor like to brag how they saved us...  and some people fall for the lies and propaganda.

But many economists deny they did much at all and Australia's economy and financial sector was hardly affected due to things set up before the coming of Rudd.

How Australia Ducked the Crisis

by Phil Dobbie

Ask an  Australian what he or she thinks of the World’s Worst Financial Crisis Since the Great Depression and the response just might be, “What crisis?” Sure, the Aussie stock market lost 59 percent peak to trough and some people lost their jobs, but relatively speaking, Armageddon gave Australia a free pass. Down Under was the only developed country to avoid technical recession. The stock market has bounced back almost 30 percent since mid-July. And housing? Home prices are actually higher now than in the summer of 2007. Last week, the Reserve Bank of Australia (RBA) increased its benchmark interest rate by 0.25 percent, a clear indication that in the central bank’s opinion the danger has passed.

Americans, Europeans and Japanese watched, enviously. Not only did the Aussies have the easiest time during the recession; they were the first to escape. What did Australia do right that the rest of us did wrong?

They picked the right trading partner

Ten years ago, the story for Australia might have been very different. At that time, 70 percent of the country’s exports went to the U.S., the U.K., and Japan.

Had Australia stayed hitched to these economies it almost certainly would have been pulled down with them in the crisis. But as China grew over the past decade, it became Australia’s No. 2 export market (after Japan) — one hungry for Australia’s rich supply of iron ore and one of the few economies to show significant growth through the crisis years. (Although China’s GDP growth rate fell from a high of 13 percent, it has stayed above 6 percent, a rate that more established economies would consider an outright boom.) In 2008, the year the crisis hit, China absorbed AU$32 billion (or 15 percent) of Australia’s exports, an eight-fold increase in 10 years.

The China Syndrome is often cited as the single most important reason the Australian economy weathered the downturn. Economist Neal Stoughton, head of banking and finance at the Australian School of Business, argues that Australia had to do very little to stimulate the economy when the crisis hit. The stimulus measures in Beijing were all that was needed, he argued on a recent edition of BTalk Australia on BNET.

As China's demand for raw materials grew it became Australia’s No. 2 export market.

Their bankers didn’t lose their minds

Australian banks proved to be more resilient during the crisis because they hadn’t exposed themselves to as much toxic debt as other nation’s financial institutions. The big four banks (Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Bank of Australia and Westpac Banking Corporation) stayed profitable, maintained their top credit ratings and wrote down less than US$4 billion between them. In 2007, non-performing loans were 0.2 percent of all Aussie bank loans, far lower than the U.K. (0.9 percent), U.S. (1.1 percent), and Germany (3.4 percent).

With Australia’s small population (22 million, less than that of Texas) the banking sector faces little in the way of competition. Non-bank lenders at their peak (just before the credit squeeze) accounted for 20 percent of all loans. The banks did a good job of grabbing most new home loans by cross-selling low-cost bank accounts, credit cards and insurance — the more you bought the more you saved. That gave home buyers less incentive to shop outside their bank for low-cost, low-documentation mortgages.

When the credit crisis hit, Aussie banks were able to raise short-term capital thanks to their strong credit ratings. The government has helped, too, instituting a three-year uncapped bank deposit guarantee in November 2008. Since then deposits shot up at an annual rate of 20 percent, another source of low-cost funds for the banks. In short, finding the cash to survive has not been the struggle it has been elsewhere, and the focus has been on growth not survival.

Their population kept growing

When the world economy is in trouble, the Aussie motto seems to be “throw people at it.” Economist Saul Eslake from the Grattan Institute think tank believes this, not China, is the main reason the country avoided a recession. He points out that per capita economic output declined for four consecutive quarters, but because the population grew, the economy still expanded. The first quarter of 2009 saw a net growth of 97,000 immigrants, the highest since the figures were first compiled in 1981. In the year to March 2009 the population grew by 2.1 percent (63 percent of that came from immigration), compared to 0.88 percent in the U.S. and 0.28 percent in the UK (2008 figures).

pt 1.

Grendel wrote on Apr 20^th, 2010 at 9:13am:

We all know American and their tendency to exaggerate...

As the hyperbolic rants of billionaire spruikers during last year's gold spike well attests. Even a Christian Evangelist self-styled minister got in on the act, exhorting the faithful to get into gold as quick as they could... after praying over it, of course, to seek god's blessing. If you believed their hype you'd be disappointed that the gold price isn't actually over $2000/ounce today, which they nearly all as one claimed it would be. No doubt those spruikers and the reverend completed a pump and dump.

ah....  thanks Helian...
I think...

pt2..

They skipped the housing collapse

More Australians means more demand for housing, and supply has not kept up. Authorities estimate that Australian builders will have added 357,000 dwellings between 2008 and 2010; household growth in metropolitan areas is expected to be more than two and a half times that. The housing shortage helped keep prices buoyant: The 2008 decline in home values was mild and the average home now fetches about 6% more than in mid-2007. This is a major relief for Aussies who, like Americans, have the largest single portion of their wealth tied up in the family home.

The RBA helped, too, by keeping interest rates relatively high prior to the crisis. Cheap money helped fuel the bubble in home prices in the U.S. and elsewhere, but in Australia, homes were simply never inexpensive enough to attract an onrush of buyers. In January 2008, Australians were paying 6.3 times their household annual earnings to buy a house, compared with 3.6 times in the U.S.

The housing shortage in Australia has helped keep home prices steady.

If Australia is indeed the first developed country to emerge from the crisis, its economy offers a glimpse into what recovery will look like in the U.S. and elsewhere — and the word “tentative” comes to mind.

Even though Australians got off extremely lightly by global standards, many were still traumatized by the downturn and they’re not ready to trust that it’s over. Although a jobless rate of 5.7 percent would seem like employment paradise to Americans today, Australian Prime Minister Kevin Rudd publicly frets about it, just as Barack Obama worries about 9.8 percent in the U.S. And while GDP and housing markets held up remarkably well, both received assistance from government stimulus programs. Australia has its equivalent of the U.S.’s first-time home buyers credit, with an AU$14,000 grant for rookie home buyers, which could go as high as AU$21,000 for brand-new homes. The OECD estimates that the home buyer’s grant and other stimulus goodies, including a big infrastructure project called the Nation Building program, saved 150,000 to 200,000 jobs that might otherwise have been lost. As in the U.S., no one is quite sure how the economy will hold up when the life-support system is turned off.

But to the extent that any recovery reflects the decisions of individual business leaders to take risk again, Australia’s rebound looks sustainable. In September, the National Australia Bank’s monthly confidence survey found Aussie businesspeople more optimistic than they’ve been since late 2003. Dunn and Bradstreet’s survey about the fourth-quarter outlook shows that 46 percent of Australian businesses expect an increase in sales and 31 percent expect an increase in profits. Some 20 percent are planning to increase inventory over the same period and 16 percent expect to hire.

And that’s enough to convince the Australian School of Business’ economist Stoughton. Confidence matters far more than government-funded infrastructure projects. “It’s our medium- and long-term perception of job prospects that influence consumer’s spending habits and employers’ hiring plans,” he says. So Australia is leading the developed world not just in GDP and employment gains, but also in the self-fulfilling prophecy that Keynes calls “animal spirits”: faith that things will get better, which is a prerequisite for their getting better for real.

There’s one other way Australia’s recovery will look like those in the U.S. and elsewhere. The Australian government borrowed a ton of money to stimulate the economy (though debt, measured against GDP, is only about half as much as in the U.S.). The inevitable cost of the government-fueled recoveries will be higher taxes or higher inflation down the line. If only Australia can show the world how to make a quick exit from that fate, too.

Grendel wrote on Apr 20^th, 2010 at 9:28am:

ah....  thanks Helian... I think...

No worries... I see now you were in medias res of a cut and paste.

Unbelievable Grendel, the degree of bias you display without a blush of embarassment, is becoming truly staggering.

Good to know the rest of the world was wrong, and just you realised it was not really a Global!! crisis at all.

from leading Australian economist Terry McCrann...

Kevin Rudd's chaos theory
   * Terry McCrann
   * From: Herald Sun
   * February 15, 2010 10:47PM

THE Rudd Government is careening out of control. It has lost all policy coherence beyond seemingly one central idea - throwing (your) money around.

Two things make it worse. The government is back to 'picking winners.' Whether by throwing darts at a hypothetical dartboard. Or on the basis of who manages to catch a ministerial ear in a plush snow hideaway or even the prime ministerial ear in a lush tropical hideaway.

Secondly, and what makes the reality of a prime minister and a government that are already worse than the benchmark in Australia - Gough Whitlam and the Whitlam government - so much more disturbing, is the utter compromising of an incompetent bureaucracy.

At least in the Whitlam period, Treasury was a bastion of tough independent advice. Both detailing reality and warning the government of the consequences of its crazier irresponsibilities.

Today the Treasury of Ken Henry excels in telling the government what it wants to hear; Henry seems to relish a role as an ex officio member of the cabinet.

The really disturbing feature is that it seems this is more because Treasury has become a (true?) 'believer' than because it has determined to give the government the advice it wants. At least if the latter, we could have some small residual confidence in it retaining a core competency.

The two big 'signature' insanities are the ETS and the NBN.

The ETS - the Emissions Trading Scheme - is a direct and permanent attack on Australia's core strength and the foundation of your standard of living.

This is the production and export of raw materials, especially coal and iron ore, and cheap and - what used to be - plentiful coal-fired electricity.

All, even worse than anything that happened under Whitlam, to absolutely no point!

Before Hopenhagen, a case could be made - an utterly stupid and empty case, but one nevertheless - that we had to join the world in cutting emissions of carbon dioxide.

After Copenfloppen, no such case can be made. The world is not going to cut emissions. Certainly not the two that matter - the US and China. Except by accident, if they slide into a replay of the Great Depression.

Yet Climate Minister Penny Wong, continues to chant, like some lonely staggering short-circuiting Dalek: "Exterminate? Extermincohabitate! Carbon will be destroyed. Car, car, flicker, flicker, Abbotts will be smuggled."

So Rudd and Wong still want to cut by 5 per cent by 2020. A figure that is on the one hand utterly irrelevant in the global scheme of things; and on the other utterly devastating to us, as it is actually a massive 35 per cent cut in emissions per head from today.

Why?

Especially as it is utterly corrosive to confidence. The business lobby groups used to prattle mindlessly before Coppenfloppen that we needed the ETS for 'certainty.' The certainty of stupidity.

Now even in their terms the threat of an ETS is uncertainty defined. Precisely when we should be building new coal-fired power stations, we continue to flounder.

This is why talk of 'compensation' utterly misses the real point. We can dole out money among ourselves, But it will be increasingly like doling out Zimbabwean dollars as we destroy the country's economic prosperity.

The other iconic insanity is the NBN - Kevin Rudd's and Stephen Conroy's $43 billion National Broadband Network.

What makes it so 'iconic' is the way it captures all the depressing themes.

It's the mother of all exercises in picking 'winners'. You will have a fibre-to-the home network. 'You' being both the country and every single individual.

And picking winners in the most intensely and unpredictably changing part of our economy and our lives in general.

The NBN will give us a 100Mbp fixed fibre network in five to 10 years. When Google is aiming at a focused network (in the US) 10 times as fast at 1Gb. And we might all be using mobile, not fixed by then anyway.

Meanwhile hundreds of highly-paid people pour on to the public payroll both for the NBN and the ETS, including Labor Party hacks getting paid close to half-a-million a year. Sorry, former Labor Party (still) hacks.

And where's Treasury in all this? At least detailing (privately) the stupidity?

Not that its modelling is any good, but while it has at least modelled almost every ETS mix, it has not modelled the one that we would actually get. We cut by 5 per cent and the world doesn't.

pt 1

pt 2.

Why not?

Because even in Treasury's 'true-believing economics,' it couldn't help but paint a devastating picture of the policy stupidity and destructiveness.

On the same basis, Rudd and Conroy committed to the NBN without the slightest analytical assessment; and they still refuse to do any.

Let's pick the biggest possible 'winner,' but let's not allow any analysis to show we've got our reality shows mixed up and have actually picked the biggest loser.

Those are the two over-embracing iconic stupidities. But it just gets worse beneath them.

Conroy decides to hand over a straight $250 million gift to the TV networks. Rudd and Peter (Garrett) decide every roof must be insulated, or at least the insulation paid for even if it's not actually put in the roof. Rudd and Julia (Gillard) decide that every school needs a 'Julia hall' with brass plate to match the brassy stupidity.

The Kevin Chaos was beautifully captured on the front page of the Australian Financial Review yesterday, as our Andrew Bolt noted on his blog.

One story had Lindsay Tanner - who used to be the last competent minister - vowing to slash red tape for business ... underneath the lead story of a proposal for new rules leading to mandatory quotas for females in businesses.

The only surprise was that Rudd and Tanner didn't announce a new department of Red Tape.

No insulation from flawed Rudd Government
   * Terry McCrann
   * From: Herald Sun
   * February 24, 2010 12:00AM

WHAT more can be said about the multi-billion dollar insulation debacle?

The basic stupidity, waste, rorting, thousands of dodgy jobs, the deaths, the political and bureaucratic bungling have all been well and truly detailed.

So, what else can be said? Plenty actually. For the insulation debacle raises much broader and deeper questions about the government's hurried, even panicked, fiscal pump-priming to 'fight' the Global Financial Crisis.

Indeed, it poses the question whether such pump-priming, even if well-designed and executed, - which this most decidedly was not - would still be fundamentally flawed.

Because of the distortions it causes. In setting out to 'save the economy' the government has succeeded in destroying the insulation industry, killing good businesses and real jobs.

Think of the bitter irony. Kevin Rudd and Ken Henry's "Go early. Go Hard. Go Households" multi-billion dollar fiscal spending splurge was supposed to fight the bust after the financial bubble burst.

And how did it seek to do so? By creating a new bubble, and not just in insulation but building more generally - with the first home-owners grant and the rush to put a Julia Gillard hall in every school yard.

And now that we have a new bust, but with yet more waste and debt, we are surprised?

Insulation was the poster child of all that insanity and the most 'perfect' example of why it was always misconceived. On both the big picture and small picture levels.

The big picture is the diversion of resources - of labor and capital - into one 'selected' area of activity. And the 'small picture' is the way so much force-feeding first totally distorted and thereby destroyed a perfectly good industry.

Didn't Kevin and more pointedly Ken, ever think: In the most basic sense, we insulate (more or less) every house in Australia right now! and what next?

At the very best, you've just succeeded in bringing forward, say, 10 years of insulation into one year.

Well, isn't it worth it, if you've kept people in jobs and spending into the broader economy?

Except, that benefit - if indeed it was - lasted all-too briefly. But now all the people in the business are out of work. And worse, more of them are out of work because of all the people and resources sucked into the super-charged spending spree.

The net effect could well be that not only have we blown $2 billion or so of taxpayer money, but we've actually made things worse in terms of the overall economy and jobs!

Indeed, it could be even worse in regard to Julia's halls. The money spent there was much more than on insulation. The over-charging by contractors greater.

And in economic terms, the resources of labor and capital used in building halls could not be used in building general infrastructure or in resources development.

So yes, we end up with a Julia hall in every schoolyard. But at the cost of not having some of the infrastructure vital to Australia's future. Indeed, vital just to help pay some of the bills incurred.

It's like a living economics lesson of why it's always such a big mistake for governments to try to pick specific things on which to spend money - when obviously they can not only pick them but force them.

Rudd and Henry might try to claim they weren't trying to do that; they were simply engaged in classic Keynesian pump-priming.

More's the pity they didn't do the most classic version of them all: paying people to dig holes and fill them up again.

You would have had the same waste of money. You would have had the same diversion of resources from other real projects to build our future. But at least you wouldn't have had the destructive distortions we've seen with insulation.

To give them their due, those successive 'cheques in the mail' were better at least on this score.

We still get stuck with the multi-billion dollar debt. Much of the stimulus money flowed straight to China, having the peripheral benefit of preserving jobs in JB Hi-Fi and Harvey Norman.

But at least, it doesn't leave too much of scar across the economic and business landscape.

And where were the major business lobby groups in all this?

Apart, that is, from holding out their hands for some of the money - albeit perfectly sensibly, if money's being tossed around hold out your hand, with the smarties smearing theirs figuratively in honey.

Certainly nowhere to be seen criticising the substantive policy mistakes. As has been their depressing failure pretty much across the board

Praise the lord Grendel, at the altar of cut and paste we worship.

Well so far you have proved only that anyone is entitled to hold an opinion, even dry politically motivated journos, as if we needed to see that again to know it is true, or that the rusted on core 30% will agree with anything they say.

If you want to find reality, look somewhere mid way between a government PR piece on these issues, and these journalistic hack jobs.

ahhhhhhhhh...  shut up Mozz...
unless you know what you are talking about.

The feared global depression has not eventuated. Reserve Bank of Australia governor Glenn Stevens now describes the credit market seizure as a North Atlantic financial crisis.

You do remember who Glenn Stevens is don't you?

See you don't have to display your usual mindless ridicule and bias just because it's me...  

I note...  most of the articles weren't written by me but by economists...  you do remember what an economist is don't you?

Quote:

If you want to find reality, look somewhere mid way between a government PR piece on these issues, and these journalistic hack jobs.

I gather you agree then that the Government PR is just hubris and propaganda...  good...  because that is the point I'm trying to make to people stupid enough to believe it.

Oh...  BTW I tried to find you a nice picture to help you understand Mozz...

http://en.wikipedia.org/wiki/Financial_crisis_of_2007-2010

scroll down there's a global map...  all the GREEN shows countries with growth between 2007-2010.

Hmmmm....  doesn't look global there does it.

No wonder Stevens call it the North Atlantic eh?

Go Poland!

Quote:

Australia's ability to withstand the worst effects of the global financial crisis was primarily due to the fact Commonwealth governments over the past two decades were able to implement significant economic reforms. This is true of the administrations headed by Bob Hawke, Paul Keating and John Howard. At the state level, most reforms during this period were achieved by Nick Greiner in NSW and Jeff Kennett in Victoria. Certainly, the Reserve Bank's decision to dramatically cut interest rates helped - as did the economic stimulus package. But nations like Britain and Ireland did not have strong enough economies coming into the economic downturn to undertake large stimulus packages.

And nothing Rudd had done prior to the US crisis, created our strong economy.  He was fortunate to have inherited a robust Australia, which is unlikely for anyone following him if he keeps up his mad spending.

LOL, the true confusionalist at it again.
Australia was one of only two OECD countries not to suffer negative growth but beo in all his wisdom says the crisis was confined to the USA, LOL. I think he takes his cues off Abbott, next he'll be telling us New Zealand didn't suffer either,LOL.  :-?

gee 2 oecd countries...
ah how many countries aren't in the oecd?

Oh and did you look at the map I posted and understand what it means?

I guess not...

But give it a try.
You might just learn something.

oh and Skippy...  don't lie about what i said...  actually read it first.  ::) ::) ::) :D

Quote:

gee 2 oecd countries... ah how many countries aren't in the oecd?

LOL, you have no idea do you? LOL. is NZ in it?LOL ::)

idiot Boy I assumed you meant Australia and Poland.

Seems to me you are the clueless one...  did you look at the Map yet?  No?

I don't know all the oecd countries off by heart do you?
I haven't seen a list of those that went into recession or didn't.
Australia and Poland didn't so were you wrong or was I right?

Quote:

Australia and Poland didn't so were you wrong or was I right

LOl what an athelete, you can peddle that bike backwards as fast as forwards.LOL :o :o

Quote:

LOL, you have no idea do you? LOL. is NZ in it?LOL Roll Eyes

I have no idea what this means or what you are on about.

As for bikes I'm still pedallng forwards, you've apparently come off yours hit your head AND ARE NOW IN A COMA HAVING DELUSIONS.

I never mentioned NZ...  you did.


Oh and yes it is in the OECD...  so what is your point or are you even arguing with yourself now oh deluded one.  Not that I haven't seen you do that before.  :D :D :D

A lot of the Arab countries, parts of Asia (particularly Japan), Europe, Africa, the U.S, Mexico - all of these places suffered as a result of the financial crisis. What else do you need to consider it global?

Rudd managed well, and the reason he was able to is the fact he was handed such a big surplus when he was elected because of Costello's good sense. I will never vote liberal, but Peter Costello was a brilliant treasurer.

Look at the map AA...  it explains global.

Poland - no
Most of Africa - no
Indonesia - no
China - no
India - no
make that most of Asia - no
Australia - no
most of the middle east - no
most of south america - no
madagascar - no
even canada almost escaped it.

Quote:

he was handed such a big surplus when he was elected because of Costello's good sense. I will never vote liberal, but Peter Costello was a brilliant treasurer.

He was a lucky treasurer,Annie, he presided over the biggest mining boom this country has ever seen,the government were rolling in it, but failed to implement any infrastructure during his twelve years as treasurer.

Global doesn't mean it affected every single country. It means that countries all over the world were affected. Not every nation was involved in WW2...should we change the name?

yes...

Yes Skippy, but I still think he did a great job and he would have made a much better PM than Howard.

you guys should start another topic perhaps.

Why? Our posts are relevant to this one.

one more time for people like  AA who obviously doesn't read the topics previous posts b4 butting in...

The feared global depression has not eventuated. Reserve Bank of Australia governor Glenn Stevens now describes the credit market seizure as a North Atlantic financial crisis.

You do remember who Glenn Stevens is don't you?

Oh God...  I didn't say they weren't, but they are going off course.
or can't you see that?

Hence my suggestion to start a new topic.

A different angle on why Australia escaped the GFC: Australia has for a long time had the highest interest among the OECD countries, it has the poorest pensioners among the OECD countries, second only to Ireland, and the reason for that is meanest "Means Test" of the basic old-age pension. Australia benefits to the tune of some 800million dollars which comes mainly from the European countries and saves more than 500million in Centrelink payments for old-age pensions.
Some immigrants who migrated from Europe in the 50's and 60's have paid taxes 2 or 3 weeks after arrival in Australia and if they now receive an old-age pension and some overseas pension, they often lose $0.815 in every dollar extra income above $6640.00, and this is another reason why Australia escaped the worst of the GFC.
The high interest rate in Australia also encourages the so-called carry trade, where people in other countries borrow at often zero interest rates and invest in Australia at some 7or more%, but as A$ is now at a very high level they are taking a currency risk, should A$ plummet.
Furthermore as the recent governments have been throwing money around like it is going out of fashion it may come back to bite.
The majority who have not lost their jobs are doing o.k but what about the 5% who are unemployed officially and another 5% who are underemployed or not counted as unemployed because their partner works and they get nothing in unemployment benefit due to the means test.
The reserve bank governor and the Australian government are only looking after the top 30% of the population, including themselves at the expense of the bootom 20%. Not really a Democracy, more of a Plutocracy.
Just a big "Super Fraud"  

hawil wrote on Apr 25^th, 2010 at 1:19pm:

The majority who have not lost their jobs are doing o.k but what about the 5% who are unemployed officially and another 5% who are underemployed or not counted as unemployed because their partner works and they get nothing in unemployment benefit due to the means test.

Yes, what about them?

What is the state's role in our lives? Does the state owe us a living? Yes - hence the benefits. How much does the state owe us? On what ground does the state owe us? What is the reciprocity in the relationship between state and citizens? Does the state owe a living to everyone who is in AUstralia? Why/why not?

Ae we spawned by the state or do we spawn it, each generation anew?

Soren I do not think that the state owes us a living, but then it should also not prevent us to earn a living, and everybody able and willing to work and not able to find work, is in a way prevented from earning a living.
Marx said that "Everybody should contribute according his/her ability and take according to his/her need" but unfortunately that requires a more enlightened society than the one currently.
In our society there are two types of parasites; the one who does not want to contribute anything towards the society and expect the society to provide him/her with a living, albeit a very modest existence and then there is the other parasite who managed somehow by luck or by crook; like the ex-communists, accumulate so much wealth that all he/she contributes is money, and expect that the money "works" for them and they live in luxury; yet money does not work, people work.