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Australia takes bold measures to safeguard banks

(Xinhua)
Updated: 2008-10-12 21:41

CANBERRA -- Australian Prime Minister Kevin Rudd on Sunday announced a three-pronged plan to further ensure the stability of the Australian financial system, including a government guarantee for all deposits in the banks.

A man looks up to the board at the Australian Securities Exchange (ASX) in Melbourne October 10, 2008. Australian shares slumped to a new three-year low on Friday, extending losses to 7.8 percent amid a worldwide stock rout on fears that government bailouts will not be enough to save the global economy from recession. [Agencies]

These unprecedented measures to safeguard the banking system during the global financial crisis were a result of a two-day crisis talks between Rudd and his senior ministers and bureaucrats.

In the new action, the government will also guarantee the borrowings of Australian banks in international credit markets and extend a program to shore up the mortgage market through the purchase of an extra 4 billion dollars (US$27 billion) in residential mortgage-backed securities.

Australia's Treasurer Wayne Swan (R) talks to Germany's Finance Minister Peer Steinbruck at the International Monetary and Financial Committee meeting during the annual IMF-World Bank meeting in Washington October 11, 2008.[Agencies]

The measures were "designed to help unclog the arteries of the global financial system," Rudd told reporters after the talks in Canberra.

Rudd urged the nation to be aware of the impact of the global financial crisis by saying "there will be many bumps in the road during the period ahead and the ride will not be smooth."

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"We are in the economic equivalent of a rolling national security crisis and the challenges are great."

"This global financial crisis has entered a new and dangerous phase with real consequences for growth, for jobs and, therefore, for the future," he said.

The government announcement came as the Group of 20 (G20) rich and emerging countries endorsed the use of all available means to deal with the global economic troubles.

The government measures are likely to bolster financial stocks but market watchers are unwilling to take a wait-and-see attitude on what will happen in the uncertain times.