Sydney - Australia on Sunday joined New Zealand as the last of the two developed countries to guarantee bank deposits. Prime Minister Kevin Rudd fell into line after previously arguing that local banks had the resilience to withstand any runs on them.
Finance Minister Lindsay Tanner had flagged the revision, accepting that it was unwise to stand against a global trend.
"The problem we have, of course, is that when fear of this kind spreads from the United States, through Europe and across the world, a relatively small economy like Australia inevitably is influenced by that," Tanner said.
Rudd also moved to replicate the guarantees that governments around the world have given for the wholesale borrowing of banks on international credit markets. Rudd said the government would repay any funds borrowed abroad that local banks defaulted on.
A third initiative to come out of a two-day emergency meeting of the kitchen cabinet was to double to 8 billion Australian dollars (5.2 billion US dollars) the value of a fund offering to buy residential-mortgage-backed securities.
The fund is to help second-tier banks and non-banking financial institutions that don't have the same access to the deposits of their customers.
The securities would be held until the market was more liquid and they could be sold.
