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CANBERRA, AUSTRALIA - AUSTRALIA will guarantee all bank deposits for three years and guarantee wholesale funding to Australian banks in an attempt to combat the global credit crisis, Australian Prime Minister Kevin Rudd said on Sunday.
Australian will also make an extra A$4 billion ($3.88 billion) available for mortgage-backed securities to help maintain liquidity for non-bank lenders, Mr Rudd told reporters, adding the measures were part of an international response to the crisis.
He said the Australian government was in close contact with other countries, including the G-20, and coordinated action was crucial.
A government spokesman later said the Australian move was being coordinated with neighbouring New Zealand, though there was no immediate word of a similar guarantee from Wellington.
'The measures I have announced today are part of also international measures designed to unclog the arteries of the global financial system,' Mr Rudd told reporters.
He said while Australian banks were well capitalised and well regulated, the measures were needed to help Australian banks compete with others in the international market.
'I don't want a first-class Australian bank discriminated against because some other foreign bank, which has a bad balance sheet, is being propped up by a guarantee by a foreign government,' Mr Rudd said.
Under the plan, all deposits in Australian banks, building societies and credit unions, would be guaranteed by the Australian government for the next three years.
The government would also guarantee term wholesale funding to local banks until global financial markets stabilised.
'The measures I have announced today are based on the advice of Australia's economic regulators,' he said. 'We are in the economic equivalent of a national security crisis, and the challenges are great.' -- REUTERS
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