Australia at risk if new GFC hits

Australia at risk if new GFC hits

As global markets become increasingly volatile, there is concern that if another global financial crisis eventuates Australia would be hard hit, says Equity Trustees.


Harvey Kalman, Equity Trustees executive general manager of corporate trustee services, said that if the global economy is rocked by another credit crisis as it was in 2008, Australia will not be insulated by its mining boom. 

"The then strong economy cushioned the impact [in Australia]. Indeed, the Australian economy escaped pretty much unscathed because of its mining boom, fuelled by China.

“This time we will not be helped by the Chinese economy, which instead will likely contribute to any crisis,” Mr Kalman said.

Speaking on the seventh anniversary of the Lehman Brothers collapse, Mr Kalman said that while the financial services industry has implemented reform since 2008 to better protect investors, there are still points of weakness.

“Seven years on [from the onset of the GFC] there are more controls over the way collective investment product suppliers operate, although it is arguable whether these have gone far enough.

“In my view a case in point is smaller asset managers that operate a responsible entity where the separation of function is difficult.

"The regulations are not yet strong enough in this area. 

“Another area of concern in funds management is that Australian Financial Services licences (AFSLs) do not differentiate between issuers of simple products and those that issue complex products – such as long/short equity funds with gearing and leveraging.

“Any crisis that impacts on equity markets may well expose these shortcomings to the cost of investors,” Mr Kalman said.

Mr Kalman noted that it is too early to understand whether the industry has implemented the correct reforms to manage another global credit crisis. 

“We won’t know until the next crisis unfolds whether we missed the opportunity to improve in all respects,” he said.

Related Articles

 

Australia at risk if new GFC hits
investordaily image
ID logo
promoted stories

Appointments

Tania Cummin

Equip Super appoints strategy and markets executive

Staff Reporter

Paul Harding-Davis

Premium China Funds Management names new CEO

Jessica Yun

Matthew Wallis

Synchron appoints new state manager

Staff Reporter

Analysis

investordaily image

A correction, not a turning point

James Swanson

Martin Dropkin

Why bond covenants matter

Martin Dropkin

Maurizio Canton

Striking a balance between security and innovation

Maurizio Canton