The Australian Economic Lesson; Reform must happen at home and in multilateral fora to be effective and sustainable.
Author: Wayne Swan</br></br>It's an unfortunate reality that two years from the start of the financial crisis, many of the world's advanced economies are still grappling with near double-digit unemployment rates, an anemic private recovery and high sovereign debt. Many countries are still yet to recoup the output lost during the crisis. But that's not the Australian story, and it's important to understand why, and what lessons can be learned from our experience.</br></br>In 2009 the global economy contracted for the first time since the 1930s but the Australian economy continued to grow. We have an unemployment rate of 5.1%--around half the levels seen in the United States and Europe. Our net debt will peak at just 6% of GDP in 2011-12. By comparison, the collective government net debt of major advanced economies is expected to hit 90% of their GDP in 2015. And we're on track to get the budget back to surplus in 2012-13--years ahead of every major advanced economy.</br></br>So how have we come through the crisis in such good shape? Our banking system is one of our great strengths. Only nine of the hundred largest banking groups in the world are rated AA or above--and four of those are Australian. Even at the height of the crisis, no Australian bank, building society or credit union required an injection of government funds. We also have tough and effective regulators. And we didn't suffer the financial market excesses of Europe and the U.S.</br></br>But it wasn't only the strength of our banks; prudent monetary and fiscal policy played a role, too. When the crisis began, the Reserve Bank of Australia aggressively cut interest rates to emergency levels and the government immediately put in place powerful fiscal stimulus to support jobs and growth. Our response was quick enough and big enough not just to arrest the decline in confidence, production and spending, but to turn them around.