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Looking back, we saw the global financial crisis start back in 2007 with the credit crunch. The housing market in the United States suffered as people who took out home loans discovered they could not pay them and there wound up being countless foreclosures. Homeowners were negative in their mortgages and wound up having to default in their loans, causing problems for the banks who were forced to take the properties back at less of a value than what they originally sold them for.

In 2008 with the fall of the Lehman Brothers, governments around the world tried to rescue their banks from the worsening housing and stock market crash. Australia responded with the first of its stimulus packages to help get the economy started again.  As Professor Joseph Stiglitz said to an Australian crowd at a lecture he spoke at, the Australian stimulus package in particular worked quite well. In fact, he considered it the most effective one.

Although it struggled as did other counties, Australia is still considered to have done better than any other country during this financial crisis. When compared to other countries, Australia did better with unemployment and the overall financial stability of the country. This is thought to be largely due to The Bank of Australia’s quick response to the crisis – the banking system stayed in good shape. Also, the country’s trading with Asia, especially China, has kept Australia’s economy running as it benefitted from the Chinese growth.

The government guaranteed bank deposits and included payments to seniors and families in its stimulus package. Since the first payments came in time for the Christmas season, retailers noticed a rise in sales that year. The first home buyer’s grant was increased and the automotive industry was also given a boost.

2009 brought the second stimulus package for Australia, which gave money towards things such as new home building, schools, repairing roads, and tax breaks for small businesses. This stimulus package was also larger than the first one.

With the recent earthquake and tsunami in Japan, it is thought that this event will further slow the global recovery time. Although perhaps overlooked, Japan is the world’s third-largest economy, so it does play a large role globally.   Their shrinking economy is sure to affect Australia as well, since they are Australia’s third largest source of imports.

China is the biggest country for economic growth, but Japan’s setbacks will affect them as well because China is their main source of imports. Japan also goes to China for 19% or their exports.

To top off all of Japan’s problems, there are uncertainties in its government that came after the quake and tsunami, but there was instability already in their Democratic Party before the disaster happened. There was talk of Japan entering into membership with the Trans Pacific Partnership trading, which includes Australia. This takes time and focus that the country will not have since they will be focused now instead on rebuilding after the disaster.

Another part of the Japanese disaster that would affect Australia is the fact that Japan’s investors will most likely delay overseas investment during this time of rebuilding.  Australia had become Japan’s third largest focus for foreign investment.

Although the disaster in Japan will likely slow down the economic growth around the world, Japan will recover. Countries like Australia have other things in place to continue to help them recover from the economic disaster as well. Australia is currently giving their banks a funding boost.  With this in place, banks can have cheaper funding and in turn this will lower mortgage rates for homeowners in Australia, giving Australian’s much needed relief in the housing market.

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