The history of the collapse of Wall Street giants in 2008 has yet to be written. We're still sifting through the debris to see what went wrong, who's to blame and how to build a better financial system. When it is written, economically small Australia will have played an outsized role.
Not in creating the mess, but in highlighting its causes and shaming those who until now have largely gotten away with it. An Australian court ruling today against Standard & Poor's is a case in point.
Federal Court Justice Jayne Jagot ruled that the ratings company misled investors by giving its highest grade to derivative-linked notes that lost almost all their value amid the global credit freeze. The decision, released in Sydney, is arguably the most important against an industry that deserves far more scorn than it's received. It may set a precedent that reverberates around the globe and leads to greater accountability.
With $1.3 trillion of annual output, Australia is rarely viewed as a world power. Its gross domestic product is smaller than that of South Korea or Mexico. Australia matters because it's a Group of 20 member, a staunch U.S. ally and one of the only major economies to avoid a recession in recent years. Its policy makers, more often than not, know what they are doing.
That's why Wayne Swan's swipe at the U.S. Republican Party in September was hard to ignore. Australia's deputy prime minister worries the anti-tax Tea Party movement is imperiling U.S. fiscal policy, and by extension, global stability. He's absolutely right about the risks excessive austerity pose to global growth.
Australia spoke up when it mattered most in another area: climate change. Hurricane Sandy offered U.S. politicians still debating an issue science long ago settled a graphic lesson in the costs of complacency. Rising sea levels now put New York in the same league as Manila, Jakarta and Mumbai when it comes to vulnerability to Mother Nature's wrath. Australia's tax on carbon emissions, introduced this year, is a prototype for nations everywhere.
A key lesson from Wall Street's meltdown was too much credit where it wasn't warranted. In Australia's case, let's give some where it's actually due.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)
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