Harvard economic historian Niall Ferguson goes on attack against Gillard’s claim that the ALP saved Australia from the Global Financial Crisis:
Ferguson lists all the reasons Australia averted economic disaster. Including:
Unlike the US, not to mention Britain, Ireland and others, Australia didn’t have asub-prime-fuelled housing bubble. Sure, prices went up substantially, but they also started correcting in 2003, well before others, and subsequent cost increases reflected a structural gap between supply and demand rather than crazy credit. Australia’s ability to circumvent the worst of the crisis was also assisted by better regulation — with a single, empowered banking and insurance regulator in Australian Prudential Regulatory Authority — and the banking system’s strong domestic focus. Aussie banks were not looking to emulate their American peers, because they didn’t need to. And the misfits that did exist, Allco and Babcock & Brown, weren’t exactly Lehman Brothers. Anyweak links in the system were easily gobbled up by the four majors, which now rank among only a handful of AA-rated banks.
Run an econometric model to answer the following counter-factual: Would Australia have averted a recession if Australian banks had been under-capitalised and engaged in US socialist style easy credit lending to lower socio-economic borrowers?