Australia faces tough year in terms of finances
The Prime Minister of Australia has warned that the country faces one of its toughest years in decades because of the global financial crisis, which has affected many Western countries.
Kevin Rudd, the Prime Minister of Australia, has warned that the country is facing one of its toughest years in decades in terms of finances, stating that the effects of the global credit crunch coupled with the reluctance of foreign banks to lend money would cause huge problems. He said that the government would take whatever action was necessary to try and boost the country’s own banking sector.
Rudd stated: “The truth is, 2009 will be one of the toughest years Australia has faced in decades as the global financial crisis wreaks havoc on Australian jobs.” The country’s banks could face a funding crisis if foreign lending continues to dry up, and this could affect the economy and business sectors profoundly.
According to officials from Merrill Lynch, which carried out a study recently, the estimated forty nine billions dollars in lending by foreign banks to Australian businesses will drop over the coming two years, and lending becomes increasingly restricted. However, in his speech Mr Rudd did not provide details on how the void in lending to businesses might be filled by the government, although some officials have predicted that an insurance type scheme similar to that in the UK may be used to guarantee loans through government backing.
According to reports Mr Rudd also stated: “Some cash-strapped foreign banks are scaling back their lending in foreign markets such as Australia. If banks do not allow clients to refinance as they would in normal conditions, then companies can be forced to sell assets, often at low value.” He also said that the restrictions with lending were already starting to have an effect on the economy.