Australia can’t avoid the volatility of global markets caused by the problems in Greece but the global financial crisis showed the resilience of our economy, says Scott Ryan, a federal government parliamentary secretary.
Global stock markets suffered heavy losses as Greece heads towards default, and the Australian market looks set for another tumble after shedding $40 billion on Monday.
“As was shown in the global financial crisis, Australia has one of the world’s most resilient, if not the world’s most resilient, secure financial systems,” Senator Ryan told Sky News on Tuesday.
However, Australian travellers to Greece have been warned by the Government about potential difficulties accessing money during the country’s debt crisis.
Withdrawing cash at ATMs and processing credit cards could become limited at short notice, the Department of Foreign Affairs says in its latest travel update.
DFAT is warning travellers to make sure they have more than one means of payment and that they have enough money to cover emergencies and unexpected delays in accessing cash.
Meanwhile, Travis Adams, equities specialist at Adelaide’s Prescott Securities, said the Greek financial crisis had more implications for the financial and stock markets than any direct impact on Australia’s corporate sector.
“Greece was, according to the Department of Foreign Affairs and Trade, Australia’s 112th largest trading partner in 2013-14 with total exports to Greece of $90 million,” Adams said.
“With exports to Greece accounting for less than 0.1 per cent of total exports, the direct impacts of a Greek default to Australian companies are limited in a real sense,” he said.
“Confidence, on the other hand, is very difficult to measure and predict, and we see this as the major impact through share prices and financial capital flows.
“The biggest risk is the risk of financial contagion as happened in the Global Financial Crisis. Contagion is banks losing confidence in other banks that they are able to repay loans to them, so lending stops and liquidity dries up. Share markets then become an avenue for investors to access liquidity and they sell, forcing share prices lower.
“The share markets and debt markets are concerned that the European, and particularly German banks, will be severely impacted by a Greek default and that confidence issue will spread around the world through the financial system as it did in the GFC.”
However, Adams said “there are several things stopping this from occurring”.
“European Banks have had ample time to assess the situation and provision and the European Central Bank will be watching with interest.
“Also the world financial markets have had plenty of time to understand the situation and the experience of the Global Financial Crisis has given regulators an understanding of what could occur and what needs to be done about it.
“Share prices are likely to fall up to the event as speculation builds as to what might occur, as participants prepare to be more liquid should something disastrous unfold.
“Share prices thankfully don’t always represent value and while Australian share prices have been higher than their long term values, shares are again looking like they will head back to a long term fair value or even below that mark.”
– with news agencies
