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The financial plan of surplus estimated in 2008-09 was $21.7 billion and in the following three years strong surpluses. Tough decisions were made in order to strengthen the Governments financial position through a product of sensible position. The Government knew there are risks that are to come with the corrosion of the economy of the globe, and knew that the only way out was through a strong budget surplus which will make certain a strong financial position at a time of heightened doubt in the international economy. Ever since, the risks have budged resolutely to the downside. Australia's strong financial position has given it the economic litheness to act in response to worsening worldwide circumstances.

When US investment bank collapsed it manifest a new period of somber interruption and doubt for universal financial markets. Followed by this collapse many other financial institutions also collapsed, therefore numerous countries have put into practice urgent situation measures to support domestic financial institutions. All over the globe, the spread linking markets and interest rates have stayed put far above the ground, and stock markets have fallen piercingly as well as displaying high levels of instability. The view for growth in the world economy has deteriorated swiftly.

Ever since the budget of 2008-09, the economic circumstances have changed significantly, as the universal financial crisis has gotten worse. Although the financial systems as well as the economy are well placed to withstand the fallout, Australia is not immune from the universal economic catastrophe. The harm being made to Australia's credit markets and enlargement prospects from the swiftly worsening globe economy has obligatory action. For that reason, the Government has put in place a wide range of proactive actions, include the assurance of bank deposits and bank wholesale funding and Economic Security Strategy of $10.4 billion, this will help defend households and financial institutions from the impacts of the worldwide financial crisis. These steps will support economic growth into the future.

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FOR

Taking over of the financial institution crisis by the Government was the best solution to avoid the down fall of the country financially and economically. Way before the government took over the tax rate became high and began becoming a challenge to the whole country. Thanks to the government because they were aware that the financial crisis is going to deteriorate markedly. Therefore the government’s economic position was strengthened by allowing the automatic stabilizers to work hard and build a $21.7 billion surplus (a shock absorber) in order to provide the suppleness essential for upcoming policy action.

The Government supported family units by delivering tax cuts and payments to pensioners and careers.The Reserve Bank of Australia, with accountability for both financial policy and the overall steadiness of the economic system, has also taken action to defend expansion and financial steadiness. It provided timely liquidity to financial establishments as intercontinental money markets became dysfunctional. In September and October, it reduced the official cash rate from 7.25 per cent to 6 per cent.

The Government also provided an assurance of deposits of official deposit-taking establishments in Australia, for a stage of three years from 12 October 2008. Until midnight on 27 November 2008, all deposits detained in qualified establishments will be assured with no charge. From 28 November 2008, a doorsill of $1 million will be applied per client. Deposits below this doorsill will carry on to be assured with no charge. Deposits higher than this doorsill and whichever deposits detained in overseas bank branches will only be assured if the establishment has applied for the assurance and accepted to pay the pertinent fee.

The huge mainstreams of Australian family units and businesses around 99.5 per cent have deposit balances that are below the $1 million doorsill. These deposits will carry on to be enclosed by the Government assurance free of charge. The doorsill intentions the fee towards the petite numeral of depositors with bulky deposit balances, such as wholesale investors. It will make sure that the assurances do not give an inducement for these investors to surrogate deposit products for short-term money market securities and other investments. This assurance gives sureness to Australians that their deposits in Australian banks, building societies and credit unions are out of harm's way, and add force to the potency of Australia's financial establishments. It will also help support consumer confidence in difficult financial surroundings.

The Government is also providing an assurance of qualified wholesale financial support of official deposit-taking organizations in Australia until market circumstances regularize. Until midnight on 27 November 2008, all qualified wholesale financial support will be assured with no charge. From 28 November 2008, wholesale financial support will only be assured if the organization has applied for the assurance and decided to pay the applicable fee. This assurance will allow Australian organizations to raise finances in a foreign country with the similar level of support as overseas organizations that have received government assurances and will facilitate reinstate self-confidence in credit markets.

This will make certain that Australia's economic segment can carry on to loan to Australian companies, businesses and family units, helping to support financial bustle during a time in which the financial attitude is indecisive. This assurance will allow Australian organizations to raise finances in a foreign country with very similar level of support as overseas organizations that have received government assurances and will help reinstate self-assurance in credit markets. This will make sure that Australia's economic sector can carry on lending to Australian corporations, businesses and family units, helping to support financial activity during a time in which the financial outlook is undecided.

The Treasurer has directed the Australian Office of Financial Management (AOFM) to buy a sum of $8 billion of residential mortgage-backed securities (RMBS) from a broad variety of Australian lenders. This action follows legislation approved by the Government in June 2008, which prolonged the variety of elevated quality assets in which AOFM can invest. The AOFM will invest the $8 billion in prime, A-rated RMBS that meet stern decisive factor in relative to the quality of the underlying mortgages. The investment will be of meticulous assistance to lenders that are not official deposit-taking institutions (ADIs).

That is, lenders that are not banks, building societies or credit unions, as non-ADI lenders are particularly reliant on funding from RMBS issuance. More than the past decade or so, non-ADI lenders have been an essential cause of competition in the mortgage loaning market. On the other hand, the disarticulation in intercontinental credit markets and the connected tapering of the Australian RMBS market has impacted on these lenders' aptitude to wield competitive pressures. The Government's inventiveness will support competition in Australia's mortgage market from an extensive assortment of lenders, including non-ADI lenders.

AGAINST

Though it is for good reasons that Australia had to act on the global financial crisis, it became a big disadvantage to the people. This is because the unemployment rate rose from five percent to 5.75 percent. Many people ended up losing their jobs for example the bankers this is because the rates of lending have gone up therefore less people or customers borrowing or loaning money from the banks. Through this the costs becomes high for the banks to handle therefore opting to suck employees in order to reduce costs.

This will enable the bank to save as little as they can and even avoid bankruptcy. For those who end up losing their jobs end up living a tough life or even decide to do any job so long as they survive. This is where insecurity comes about, some individuals might opt to robbery, selling of drugs, or weapon trafficking and this becomes a threat to the whole country. Never the less other will start taking drugs like cocaine, weed and more in order to forget their problems and in the long run becomes an issue in the community.

It is a good thing that the Government has tried to reduce inflation in the country by increasing the interest rates in the banks but at the same time it has proved to be a big challenge to the people in the country, businesses and businessmen, and financial institutions at large. This is because there has been a considerable collapse in purchaser self-assurance over the route of 2008 in Australia over and above the rest of the globe hoists the prospective for weaker expansion in family unit consumption and house investment, as family units feel less confident about their capability to spend and borrow, due to high rate of interest rates in the banks and not forgetting the high cost of living due to increase in prices of goods and services. Therefore the consumer has to reduce his or her needs so as to survive.

For business people their businesses will go down because the consumers will be able to consume less and the demand for the goods and services by the consumers will be less therefore causing the some businesses to fall. For the banks the profits will reduce and that’s what caused some banks to collapse due to bankruptcy.

Conclusion

Australia's financial system is in a great deal stronger spot to endure the fallout than the majority of other countries. Financial expansion remains rock-hard and contrasts auspiciously with other highly developed economies that are close to downturn. Australia will also carry on to be a key recipient of the financial escalation consequential from the industrialization of up-and-coming economies such as India and China. In addition, the Australian accommodation market does not acquire the excess of physical stock that is obvious in some foreign country markets, above all the United States.

The rule and management of Australia's financial establishment is physically powerful, effectual and logical. In its Universal Competitiveness report issued on 8 October, the World Economic Forum graded Australia in the pinnacle four countries out of the 134 countries it assessed in terms of the unassailability of our banks and in the summit three in terms of auditing and reporting standards. Australia's major four banks are amongst only 11 of the planet’s top banks with a credit ranking of AA or exceeding. Previous to the sub-prime crisis, sub-prime loans accounted for around 15 per cent of the US mortgage market. However, in Australia the closest equivalent to sub-prime mortgages — non-conforming housing loans — continue to make up around one per cent of exceptional housing loans in Australia. The unassailability of Australia's economic system reflects the fact that Australian banks, building societies and credit unions have almost no presence in the Australian non-conforming housing loan market.

With regard to macroeconomic policy settings, the Government continues to budget for surpluses, while most other countries are in significant deficit (see Chart 2.2). In addition, the Australian Government's balance sheet is in a net asset position. This outcome gives Australia a level of fiscal policy flexibility that is unusually strong among advanced economies. The Government, in conjunction with the economic regulators, is prepared to take the necessary action required in these uncertain times.

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