A new paper by University of Melbourne economists has highlighted the vulnerability of the Australian economy to the global financial crisis, but the report also highlighted the need for an increased focus on the financial system’s vulnerabilities.
“The global financial system is an increasingly powerful instrument of economic coercion,” the authors wrote.
“As a result, Australia has experienced a significant and prolonged rise in its dependence on the international financial system.”
The authors argue that Australia’s dependence on global financial markets has “become increasingly problematic, particularly in the context of Australia’s current fiscal and monetary challenges”.
The paper argues that the global banking system has become increasingly vulnerable to the collapse of global stock markets, as investors increasingly view the US economy as a safe haven.
“Global financial institutions have become increasingly dependent on international financial markets, particularly the US, for their operations,” the paper says.
The paper also highlights the fact that, in recent years, the financial sector has been able to shift more of its operations to emerging markets, where it is now less dependent on the US market. “
This dependence has created the risk that they will be unable to meet their obligations to their investors.”
The paper also highlights the fact that, in recent years, the financial sector has been able to shift more of its operations to emerging markets, where it is now less dependent on the US market.
“It is no longer a question of the financial institution being able to adapt to the changing environment,” the report says.
“[It is] that the financial institutions in emerging markets are more exposed to the adverse changes that might occur in the global economy.”
The report also suggests that “the global financial sector needs to be more proactive in terms of identifying the vulnerabilities of its assets and assets of its clients.”
For example, if a financial institution is unable to identify the “risk of contagion”, it will need to look to other financial markets or “international capital markets”, where it can reduce its exposure.
“To avoid contagion in the future, financial institutions need to develop new mechanisms for managing their risk exposure to other assets and/or other financial intermediaries,” the researchers wrote.
The paper recommends that financial institutions invest more in “counterparty risk management”, a term used to describe the “asset management and risk management strategies used to mitigate the risk of a company’s defaulting on its obligations to its clients”.
“The financial institutions of the world need to be better positioned to manage counterparty risk,” the study concluded.
The authors warn that Australia has not yet developed a “plan B” for dealing with the global economic crisis.
“Australia’s response to the financial crisis will depend on its future and the global environment,” they wrote.