Australian banks get IMF thumbs up
The International Monetary Fund (IMF) says Australia's banking system is well placed to withstand a US-style housing crisis.
IMF monetary and capital markets division chief Dr Cheng Hoon Lim said so-called 'stress tests' had been carried out to see how Australia's banks could cope with a housing collapse like that which hit the US and UK in the past five years.
"Even in the most extreme scenario the banking system fared pretty well," she said.
Cheng said the stress tests conducted by the IMF showed Australia's banks would hold up even in the event of a 5 per cent drop in GDP and 35 per cent fall in house prices.
Meanwhile, IMF deputy director for the Asia Pacific region Takeda Masahiko suggested Australia needed to focus on its strengths and Asia's weaknesses to make the most of the 'Asian century'.
Australia should take advantages of its natural advantages, including resources, agriculture, tourism and education.
"You need to see how different you are and make use of what's strong in Australia," he said.
But he said Australia also needed to take note of Asia's weaknesses and to provide support to ensure emerging economies continued to grow.
He said Asian countries faced challenges in developing infrastructure, boosting productivity and utilising environmentally friendly technology.
"Unless Asia can overcome these challenges, there is a view that it might end up in what's called the 'middle-income trap'," he said.
"If you look at the weaknesses of Asia and have found some areas where you can offer support that will help meet the demand on both sides so Australia and Asia can prosper together."
Takeda said growth in Asia's emerging economies was expected to slow in the short term as a result of the global downturn but the IMF still expected China's economy to achieve a "soft landing".