In its Global Financial Stability Report (GFSR) released overnight the International Monetary Fund (IMF) paints a sobering picture of the ongoing challenges facing the global financial system.
Despite substantial policy responses from governments worldwide — which are contributing to some early signs of stabilisation — the IMF notes that the global financial system remains under severe stress with the crisis becoming more broadly felt across households and corporations, and across the advanced and emerging worlds.
The report highlights the key causes of the global recession and the magnitude of the challenges facing the global economy as the Government goes about framing the upcoming Budget.
Ongoing dislocation in global financial markets has seen further downward revisions in global forecasts, with the world economy now expected to contract in 2009 for the first time in 60 years.
The IMF will release tomorrow its World Economic Outlook, which is expected to show further downgrades to its forecasts for the global economy in 2009 and 2010.
The IMF in the GFSR has again revised up its projections of aggregate losses on US-originated debt securities during this crisis to US$2.7 trillion, from US$2.2 trillion previously.
The report also underscores the continued importance of the work of the G-20 in providing a global response to strengthening financial regulation and rebuilding global confidence.
The forthcoming meeting of G-20 Finance Ministers that I will attend this week in Washington DC will play a key role in ensuring that we maintain momentum on implementing the measures agreed at the recent G-20 Leaders' Summit in London.
Australia has a strong regulatory framework for the financial sector which has helped ensure Australian deposit-taking institutions continue to maintain sound balance sheets.
Our four largest banks are among the 11 strongest in the world, as rated by Standard & Poor's.
However, Australia is not immune from developments in international financial markets.
That is why the Government has taken decisive steps to strengthen the resilience of Australia's financial sector — including guaranteeing the deposits and wholesale funding of Australia's banks, building societies and credit unions.
22 April 2009