After 20 years of success, reform is a hard sell
SOME POLITICIANS WIN power and do not know what to do with it. Others come to office determined to change everything and end up doing nothing. A respectable case can be made, in certain places at certain times, for concentrating on good management and making only a few big changes, but making them well. In Australia, this case rests not just on the thoroughness of the 1983-2003 reforms but on the fact that the economy has recently passed a stress test that all other rich countries’ economies to some degree failed. The global financial crisis did not pass Australia by, but neither did it drive it into recession.
The first reason for that was the strength of the four big banks. They were strong partly because Australian banking had already been through some bad times. Two had almost gone under in the 1990s, when several state-owned banks foundered and others were taken over. That episode, and the Asian crisis of 1997, made them tighten up. Then came the collapse of HIH Insurance in 2001, which led to a revision of regulatory oversight. As a result, Australia’s banks in 2008 had higher capital ratios than their counterparts in America and Europe and were watched over closely by an active and conservative regulator. ...
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