Dr Tony Stokes Senior Lecturer in Economics AUSTRALIAN CATHOLIC UNIVERSITY Strathfield Dr Tony Stokes - Economics at ACU National 1.

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Presentation transcript:

Dr Tony Stokes Senior Lecturer in Economics AUSTRALIAN CATHOLIC UNIVERSITY Strathfield Dr Tony Stokes - Economics at ACU National 1

2 Dr Tony Stokes - Economics at ACU National

How did the financial crisis begin? The financial crisis began in the US in the middle of Since % of new U.S. mortgages were non- prime mortgages, often with very high loan-to-value ratios and minimal documentation. It looked like until the middle of 2008 that global growth would cushion the damage in the US. The latest stage of the financial crisis started in September 2008, when several important U.S. financial institutions had financial problems with bad debts and a lack of liquidity and closed. 3Dr Tony Stokes - Economics at ACU National

How did the financial crisis begin? Lehman Brothers’ decision to file for bankruptcy, in particular, impacted global financial markets, worsened the severe contraction in market liquidity and heightening concerns about risks. This led to a rise in borrowing costs for both financial and nonfinancial firms (see next slide) This also spread to other nations where financial organisations had borrowed from these markets. The probability of debt defaulting in the US has doubled in the last 12 months 4Dr Tony Stokes - Economics at ACU National

5

What are the effects of the global financial crisis? 6Dr Tony Stokes - Economics at ACU National

What are the effects of the global financial crisis?  The global financial crisis has led to falling share markets, and instability in financial and foreign exchange markets  This uncertainty has discouraged investment and spending leading to falling economic growth rates and rising unemployment levels.  The IMF predicts that the level of World GDP will fall to 3.4% in 2008 and fall further to 0.5% in  Advanced Economies are expected to have -2% growth in Dr Tony Stokes - Economics at ACU National

What are the effects of the global financial crisis? 8Dr Tony Stokes - Economics at ACU National

What are the effects of the global financial crisis? Dr Tony Stokes - Economics at ACU National9

What are the effects of the global financial crisis? 10Dr Tony Stokes - Economics at ACU National

What are the effects of the global financial crisis? 11Dr Tony Stokes - Economics at ACU National

12Dr Tony Stokes - Economics at ACU National

What have been the governments’ response? Central banks in the advanced economies have taken strong actions to cut policy rates and improve credit provisions. 13Dr Tony Stokes - Economics at ACU National

What have been the governments’ response? Many governments have announced fiscal packages to boost their economies. Fiscal stimulus in G-20 countries in 2009 is projected to contribute 1.5 percent of GDP. 14Dr Tony Stokes - Economics at ACU National

What have been the governments’ response? 15Dr Tony Stokes - Economics at ACU National

When will it all end??? 16 Dr Tony Stokes - Economics at ACU National

Recovery will be slow Dr Tony Stokes - Economics at ACU National17

When will it all end??? The IMF has predicted that global recovery will be slow. In 2010 global growth is projected to be 3.0%. Advanced economies are expected to grow by only 1.1%. The emerging and developing economies are projected to grow by 5% in 2010 with China leading the way with 8%. These levels are still likely to lead to increased unemployment rates at least until Dr Tony Stokes - Economics at ACU National