July 1st, 2011 
Travis Brown The Australian central bank says the country’s financial system is not at risk amid growing concerns that Greek debt default may result in a second financial crisis. Reserve Bank assistant governor Guy Debelle said on Monday that Australian lenders did not appear to have much exposure to the sovereign debt crisis in Europe.
“At this stage, at least, there is no sign of those stresses materialising,” he said, following a speech at a conference in Sydney.
According to Mr. Debelle, Australian banks made heavy use of offshore international funding in 2009, and have been repaying this debt faster than they have been issuing new bonds during three of the last four quarters.
In his speech, Mr Debelle said Australian lenders, heavy users of offshore funding in 2009, had been repaying offshore debt faster than they had been issuing new bonds in three of the past four quarters.
Commonwealth, Westpac, ANZand NAB remained highly profitable during the GFC without government bailouts, unlike many of their counterparts in the US, Europe, and elsewhere. There are growing fears that the problems affecting Greece may be contagious and affect the rest of Europe, sparking yet another systemic financial crisis.
Money Markets in Australia changed tack earlier in the month, with investors betting that the RBA will cut interest rates in the event of a fresh wave of financial crisis.
Futures markets are now pricing a 70 per cent probability that the central bank will cut borrowing costs before the year is out, which stands in stark contrast to the 72 per cent probability of a rate hike that the Sydney Futures Exchange was pricing as recently as June 1st.
Betting on the futures market has now flipped to a 70 per cent chance the RBA will lower borrowing costs by the end of the 2011 calendar year.
This is a stark turnaround from the 72 per cent chance of an interest rate increase that contracts on the Sydney Futures Exchange had priced in on June 1.
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