2 Jul 2015
What would Grexit mean for Australia? - Capital Economics
FXStreet (Bali) - The Australian economy would be largely untouched even if the current problems in Europe culminated in a widespread financial crisis and another euro-zone recession, notes Paul Dales, Chief Australia & New Zealand Economist at Capital Economics.
Key Quotes
"The Australian economy would be largely untouched even if the current problems in Europe culminated in a widespread financial crisis and another euro-zone recession. That said, if the Reserve Bank of Australia finds itself debating whether or not to cut interest rates further to support the domestic economy, a crisis in Europe could prompt it to act sooner rather than later."
"We are reluctant to take too much comfort from the fact that Australia has weathered the past few global financial crises well since they occurred when the economy was being boosted by the mining boom. That said, any financial crisis is likely to much less severe and more localised than the global financial crisis that came out of the blue in late 2008. And even though Australia is more vulnerable to overseas developments now that the mining boom is over, it’s just not very exposed to what’s happening in Greece and the euro-zone."
"At the end of March, the exposure of Australian banks to Greek institutions, businesses and households amounted to nothing more than $20m. That’s equivalent to just 0.0005% of their total assets of $4trn. Their exposure to the euro-zone as whole was larger, at $46bn, but that’s still equivalent to only 1.2% of their total assets. As such, even if Australian banks had to write-off a chunk of that debt, they would probably still be able to lend to domestic firms and households."
Key Quotes
"The Australian economy would be largely untouched even if the current problems in Europe culminated in a widespread financial crisis and another euro-zone recession. That said, if the Reserve Bank of Australia finds itself debating whether or not to cut interest rates further to support the domestic economy, a crisis in Europe could prompt it to act sooner rather than later."
"We are reluctant to take too much comfort from the fact that Australia has weathered the past few global financial crises well since they occurred when the economy was being boosted by the mining boom. That said, any financial crisis is likely to much less severe and more localised than the global financial crisis that came out of the blue in late 2008. And even though Australia is more vulnerable to overseas developments now that the mining boom is over, it’s just not very exposed to what’s happening in Greece and the euro-zone."
"At the end of March, the exposure of Australian banks to Greek institutions, businesses and households amounted to nothing more than $20m. That’s equivalent to just 0.0005% of their total assets of $4trn. Their exposure to the euro-zone as whole was larger, at $46bn, but that’s still equivalent to only 1.2% of their total assets. As such, even if Australian banks had to write-off a chunk of that debt, they would probably still be able to lend to domestic firms and households."