Question

In a Speech given on 16th March 2014 and titled “Reflections on the Financial Crisis,” former Assistant Governor (Financial System) of the RBA Dr. Edey said: “I am often asked why Australia was able to come through the GFC relatively unscathed. Unlike the US, the UK and the euro area, Australia didn't have a recession and we didn't have any bank failures. My usual response is that it was a mixture of good luck and good management.”
This sentiment is echoed in a Speech titled "Lessons and Questions from the GFC" given on the 6th of December 2018 in Sydney, by the Reserve Bank of Australia Deputy Governor Dr. Guy Debelle who stated: “Good luck certainly played a role. But the policy actions made an important contribution too” referring to the experience of Australia during the GFC.

Explain what they means by “a mixture of good luck and good management,” making specific reference to both ad-hoc measures during the GFC and the general approach to financial stability. (max 400 words)

Answer 1

1. Underlying the suggestions that I have made is a firm belief that the success of our approaches to crisis management needs to be viewed and assessed with a wide focus.
2. Certainly there is the question of efficacy in containing the crisis at hand, and the balance between this and the costs, actual and potential to the public sector.
3. But we also must keep in mind the implications for the functioning of the global financial system in the near and medium term.
4. This requires consideration of prospects for restoring normal market functioning and access, and the creation of appropriate incentives.
5. When difficulties arise, the challenge remains, as always, to encourage and work with countries that are ready and able to implement strong corrective actions and to find financial solutions best suited to both the specific case and the broader functioning of the global financial system.
6. A flexible case-by-case, managed-market approach represents the best bet—and the only realistic option—for achieving those goals as we face a challenging future