Twenty years on from the Asian Financial Crisis it is timely to assess how the region is placed to manage and mitigate risks of economic crisis, and to consider Australia’s role in this. This analysis frames the policy options Australia faces through imagining a potential future scenario where a major ASEAN economy faces vulnerabilities as a result of volatile capital flows, exposing gaps in current risk management and crisis mitigation arrangements.

Australia can contribute to reducing external risks through a strategic and consistent approach to its bilateral engagement with countries in the region. It should look for opportunities to work with countries in the region to make maximum use of the G20 and International Monetary Fund given the significant common risks that could affect the region as a whole. At the same time, it should increase its preparedness for a range of crisis situations and create some flexibility in its legislative framework to provide support outside the framework of an IMF-supported crisis program. This would allow it to respond flexibly alongside regional partners in a fast-moving crisis situation. It would also provide a basis to work with regional partners in ‘peacetime’ to improve its ability to link with regional crisis arrangements. This would also give Australia greater confidence in achieving better outcomes in future crisis situations, contributing to the resilience of the region and, ultimately, the Australian economy.