Australia and New Zealand launched co-ordinated plans to safeguard their banking systems yesterday, hoping to stem heavy losses suffered by their currencies and markets last week.

The two governments pledged yesterday to guarantee all bank deposits. Canberra went further, guaranteeing all term wholesale funding by Australian banks in international markets and doubling its pledge to purchase residential mortgage-backed securities to A$8bn ($5.2bn, €3.8bn, ￡3bn).

“Australian banks, despite the fact that their balance sheets are in excellent shape, now have to compete with these foreign banks for funding on global financial markets, foreign banks which, despite their weaker balance sheets, now have the advantage of a government guarantee,” said Kevin Rudd, Australia's premier.