Avoiding the Global Financial Crisis in Australia: A policy success?

Abstract

The depth and spread of the international financial crisis that erupted in 2007–08 were not primarily due to the bursting of the credit-fuelled asset price bubble in the US housing market (Dodd and Mills 2008; Gorton 2008). Many countries suffered bigger real estate collapses than the United States without experiencing a financial crisis (Reinhart and Rogoff 2009: 245). Instead, in the United States, the United Kingdom and parts of Europe, the crisis was largely driven by the scale of the exposure of banks and financial institutions to highly leveraged investments in US residential and commercial mortgage-backed securities.² Such exposures