(11 May 2010 – Australia) As an agreement in Europe begins to settle the debt panic, the Reserve Bank of Australia is remaining cautious amidst fears the crisis could spread beyond European borders possibly making monetary action necessary.The US stock market plummeted a massive 9 percent on Friday signalling the greater global panic surrounding the possibility that Greece would have to default on its liabilities.
Australia came out of the global financial crisis seemingly unscathed however if panic does spread, despite an agreement being reached by the EU, it could cause a second financial crisis.
If the Greek situation appears to spread beyond European borders the Reserve Bank of Australia may be forced into reversing its monetary policy and reduce rates as quickly as its increased them, as the federal government would not be in a position to lubricate consumers wallets with extra funds to stimulate the economy this time around.