This suggests that the decline in economic activity over the remainder of this year will decelerate, and after a stabilization phase, moderate positive quarterly growth rates are expected by mid-2010. The recovery will be driven by the macroeconomic stimulus and other measures designed to restore the normal functioning of the financial system. For the moment, the risks to the economic outlook appear balanced.
But in the intervening period, of course, the Australian financial system had changed out of all recognition, a result of liberalisation, competition and innovation. No longer was the potential borrower for housing on bended knee to a stern-faced bank manager, the way they had been in earlier periods of low rates. Now, lenders were under more competitive pressure to grow their balance sheets.