By Luke Cornish | 07 Jun 2010 A leading economist has warned that any attempts by banks to reduce their reliance on offshore funds would jeopardise the economy. ANZ senior economist Ange Montalti said the need for Australia's financial system to access wholesale borrowing is inextricably linked to the country's position as a deficit economy and any move away from that could come at a considerable cost to the Australian economy, jobs and living standards. "Even though the Australian economy rode through the GGFC relatively well, the severity of this event on other economies and its fatal impact on some institutions, have prompted local firms to reflect on the appropriateness of their own funding strategies," Montalti said. "Organisations that pursue a reduction in external funding are acting as the conduit for reducing the current account deficit and reducing the economy to a new closed economy equilibrium. The transition could be painful if adopted broadly." Montalti said that banks specialised role in mobilising saving for investment mean that strategies that alter balance sheet trajectory have enormous leverage over the economy, the structure of the financial sector and the market position of individual competitors.
