Peer Review of Australia
Australia underwent an FSAP in 2006, which concluded that "Australia's financial system is sound and healthy, having benefited from sustained favorable macroeconomic conditions over the past 15 years." At the same time, the FSAP highlighted some issues to be addressed in failure resolution and crisis management, banking supervision, securities regulation, and insurance regulation and supervision. The Australian financial system weathered the global financial crisis well. The ADI sector remained profitable and no entities received any public capital support. The resilience of the system largely reflected the resilience of the economy at large. Structural reforms ensured that macroeconomic conditions at the time of the crisis were favourable, while a combination of automatic stabilisers and proactive policy measures buffered the domestic economy from the sharp deterioration in global economic conditions. In addition, the authorities took a number of steps to address specific financial system vulnerabilities. An important lesson from Australia's experience is that strong economic fundamentals provide a crucial bulwark against the risks of a financial crisis, and that appropriate macroeconomic policies matter as much for the health of the financial system as does the strength of the supervisory framework.