The sub-prime crisis which emanated from the USA in 2007 has had profound
effects around the world and is providing new insights into financial interlinkages and
risk management issues. This paper examines the effects of the sub-prime crisis on the
Australian financial sector with three objectives in mind. One is to provide a concise,
but comprehensive, overview of these effects for readers interested in understanding
the impact of the sub-prime crisis on an economy outside of the USA. The second
objective is to identify the main channels of transmission of effects. The third
objective is to identify lessons learnt from the current experience for risk management
strategies of financial institutions, corporates, and monetary/prudential authorities.