Source: www.business.theage.com.au
Rudd's $700 billion bank guarantee
Michelle Grattan and Vanessa O'Shaughnessy
October 13, 2008
THE Government will guarantee the $600-$700 billion deposits in Australian financial institutions in a move to shore up local confidence and protect the nation's international competitiveness.
Declaring that the country is in "the economic equivalent of a rolling national security crisis", Kevin Rudd has also announced that all borrowing by Australian banks and other deposit-taking institutions from overseas will be guaranteed.
The deposit and lending guarantees are unprecedented in Australian banking history and are an immediate response to the dramatic moves by other countries to prop up their failing financial systems.
Another $4 billion is also being injected for non-bank institutions to provide more funds for housing and extra competition to the big banks.
The three-pronged package was unveiled after a two-day weekend crisis meeting of cabinet's strategic priorities and budget committee, which included Treasurer Wayne Swan on the phone giving updates from a series of international meetings in Washington.
As Australia braces for the crisis to hit the real economy hard, the Government is also considering whether to loosen the purse strings and spend more to stimulate the flagging economy.
Mr Rudd, declining to rule out a mini-budget, said the Government was ready to take "whatever action" might be needed to secure Australia's long-term future.
"This global financial crisis has entered a new and dangerous phase with real consequences for growth, for jobs and therefore for the future. As a consequence the Government . . . is examining measures for the future about how best to deploy the surplus," he said.
Mr Rudd and Mr Swan said Australia's growth would contract further - though not to zero - and unemployment would rise above the budget forecast of 4.75% by June.
But Mr Rudd stressed Australia's financial system remained strong and the measures were driven by overseas events and the need to make sure Australian institutions were not disadvantaged compared with their counterparts abroad.
"As global financial conditions have deteriorated markedly governments around the world have taken unprecedented steps to guarantee the liabilities of their financial systems," Mr Rudd said.
"Australian banking institutions remain sound, well-capitalised and profitable with high asset quality."
Mr Rudd said he was not prepared to have Australia's banks placed at an international disadvantage.
Opposition Leader Malcolm Turnbull pledged support for the measures and backing to get legislation quickly through Parliament. "I think Australians want to see their leaders working together," he said.
The deposit guarantee, which takes effect immediately, will operate for three years without any cap, and will then be reviewed. The guarantee for borrowings abroad will last until conditions have normalised.
In a dramatic weekend in Washington, the world's leading powers pledged to unite to tackle the financial crisis after a warning from the International Monetary Fund that the global system was on the brink of meltdown.
Following a gathering of G7 rich nations on Friday, leading emerging nations came to Washington for a vital G20 meeting. The G20 countries, accounting for 85% of the global economy, agreed to use "all financial and economic tools" to stabilise the system.
The head of the IMF, Dominique Strauss-Kahn, claimed a breakthrough with the first global pledge by IMF members to co-operate to stabilise turmoil in the financial sector.
He had earlier warned that the financial system risked collapse.
"Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown," he said.
Attention last night was on a gathering of European leaders in Paris that was expected to work on a collective action plan to help their ailing banks.
But, with little certainty around international efforts to rescue global financial markets, BT Financial Group chief economist Chris Caton said predictions were impossible.
"When markets are in this mood you have no idea how long it will go on," he said.
"I guess people are not yet convinced the governments can do enough - or that it will work when they do."
Australian banks welcomed the Government's moves. Australian Bankers Association chief executive David Bell said Australian banks were well capitalised but were still affected by the seizure of international financial markets.
"This levels the playing field and allows Australian banks to compete equally and fairly," he said.
Ends.
Cheers, Pie :)
- Forums
- ASX - General
- rudds 700 billion dollar bank guarantee...
Source: www.business.theage.com.auRudd's $700 billion bank...
-
- There are more pages in this discussion • 4 more messages in this thread...
You’re viewing a single post only. To view the entire thread just sign in or Join Now (FREE)
Featured News
Add ASX (ASX) to my watchlist
|
|||||
Last
$63.10 |
Change
0.180(0.29%) |
Mkt cap ! $12.23B |
Open | High | Low | Value | Volume |
$62.97 | $63.63 | $62.61 | $17.85M | 282.6K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 923 | $63.01 |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
$63.11 | 576 | 1 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 6 | 62.700 |
1 | 66 | 62.100 |
2 | 13 | 62.000 |
1 | 160 | 61.900 |
1 | 8 | 61.850 |
Price($) | Vol. | No. |
---|---|---|
63.550 | 50 | 1 |
63.680 | 1 | 1 |
63.700 | 65 | 2 |
63.880 | 507 | 1 |
63.900 | 157 | 1 |
Last trade - 16.10pm 06/09/2024 (20 minute delay) ? |
Featured News
ASX (ASX) Chart |