I am also at a loss to understand how some people think Australia is going to remain largely quarantined from all this international financial turmoil - last I looked we were still part of a globalised economy...a nation who's GDP relies on outbound commodities and inbound tourism to a large extent.
It is not immune and nor has it been. I have taken issue with the housing doomsdayers for the last year or so on pprune, carrying on about a sub-prime equivalent in the Australian housing sector.
To promote growth or stimulus, the most effective means( as pushed by the IMF ) is for the RBA to drop interest rates. It would bring the dollar down some and give business good investment opportunity; as well as providing huge extra cashflow or savings for mortgaged Australian housholds.
The main reason they can't do it is because the housing fundamentals are SO strong. The stimulus of cutting the cash rate to well under 3% would create the mother of all Australian housing bubbles.
But on the other hand. A vast amount of Australian security and wealth is tied up in property. A doomsday fall in prices would be politically unacceptable. And interest rates ( amongst other political measures ) would be dropped.
I have had large amounts of Australian property debt in multi-currency loans being charged not much more than 1%. The financial power is colossal- per million dollars of debt the holding costs under a grand a month! You can yield between 30 and 50K on residential property on a million dollars; double for commercial.
It is an apples to oranges example as multi-currency loans have inherent risk. But it a demonstration of the firepower AUstralia still has available to essentially protect the property market ie: drop interest rates to unprecedented lows.