|The Australian financial system emerged largely unscathed from the 2007/8 financial crisis. Why? What was so different about Australia and what lessons can be learnt from the Australian experience in terms of broader debates about the causes of the crisis and the reform measures needed to minimise the changes of a similar crisis occurring again? We argue that Australia was different because its banks exhibited a cautious culture of ‘vanilla’ banking focused upon the domestic mortgage market and commercial loans and did not did not reinvent themselves as ‘dealer’ banks. Why did vanilla banking survive in Australia but not in the US, the UK and other countries?
One plausible set of explanations focus upon lesson-learning by the Australian regulator and the banks themselves. But why did regulators and bankers in other countries not learn from their mistakes? What is important here is not simply whether agents learn lessons but whether lesson-learning leads to structural changes which alter agents’ incentives. In the Australian case the banking crisis led to a change in competition policy which reduced the incentives of the dominant banks to take risks and facilitated the emergence of a mutually beneficial and effective ‘relational’ banking culture between the banks and APRA.
Andrew Hindmoor is Associate Professor in Public Policy and Associate Dean, Research at the University of Queensland. Prior to joining UQ, Andrew held positions at both the University of Exeter and the London School of Economics. His research is focused upon public policy and the methodology of rational choice theory with a primary interest in the causes and consequences of the global financial crisis. Currently, Andrew is working on three Discovery Grants, two examining various aspects of the global financial crisis and another around the application of the policy agendas method to the study of the Australian policy agenda.
Thursday, 22 March 2012 | 5.30pm - 7.00pm
Brown Theatre, Ground Level, Electrical & Electronic Engineering Building (193)
Contact Erin Eades in the School of Social and Political Sciences at firstname.lastname@example.org or (03) 8344 6564.