Australian Prime Minister Kevin Rudd reassured Australians and said that Australia's retail banks were among the safest in the world.
The Opposition Liberal party has warned of the danger of bank runs in Australia which could destroy smaller banks and credit unions.
Mr Rudd said that the World Economic Forum had yesterday released a report rating Australia's banks the fourth most sound in the world in a ranking of 134 nations.
While the road ahead was rocky, Mr Rudd said the nation's economic fundamentals remained solid. "We have a strong budget surplus as a buffer for the future, and to be used to meet the challenges of the future," he said.
Mr Rudd has suggested his Government might move to protect up to $20,000, but Mr Turnbull said guarantees had to be provided for $100,000.
Opposition Leader Malcolm Turnbull said the Government must back bank deposits to assure individuals and small businesses that at least the first $100,000 of their savings was safe. Australia and New Zealand are the only OECD countries without a direct government-backed guarantee on bank deposits.
Mr Turnbull said the crisis had already sparked a shift towards the Big Four banks at the expense of smaller players.
"There is a real risk at present that depositors will shift their savings from smaller institutions such as regional banks and credit unions to the Big Four banks," he said. "This has the potential to considerably strengthen the big institutions' competitive position at the expense of their smaller rivals."
Mr Swan said that Australia's well regulated, well capitalised banking system would provide a bulwark from the fallout.
The silver lining from all of this is the increasing certainty that interest rates could fall by as much as 2 per cent more [to a cash rate of 4%pa] by mid next year.
This will be the sort of solution that mortgage payers want to see happen.
