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The international financial sector faces ongoing challenges in its bid to restore stability, the International Monetary Fund has warned, but Australia remains in a better position than most.
The IMF said overnight that the financial crisis would see bad debts rise to US$4.1 trillion (A$5.7 trillion) and a failure for world government to take more decisive action would see conditions worsen.
“The credit deterioration is taking an increasing toll on bank balance sheets, with the IMF emphasising the need to cleanse them of impaired assets,” the IMF’s Global Financial Stability Report read.
“Write-downs continue to mount as the collapse of economic activity leaves companies and individuals increasingly unable to repay borrowings.”
The IMF’s warning coincided with assurances from Reserve Bank governor Glenn Stevens however that Australia remained better placed than most countries and would ride out the downturn with its government and financial system in good shape.
“As I have said on previous occasions Australia’s long term economic prospects remain good and there remain good grounds to think that we will continue to weather the storm better than most.”
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