Australia is in a stronger position than most to handle the expected global slowdown to come from the European debt problem, Treasurer Wayne Swan said. In fact, the country can maximise the opportunities that will come from the Asia-Pacific, now the strongest part of the global economy.

"We can't be blind to the fact that things could suddenly worsen if there were some sort of systemic shock elsewhere in the globe, but my core view is that we are in a far stronger position to handle it," he told the Weekend Australian.

Swan pointed to China as having the firepower to stimulate growth in the global economy. Although China's manufacturing sector shrank for the second consecutive month in December, Swan said that based on his analysis, China will continue to manage its domestic challenges in a prudent manner.

There is speculation that the People's Bank of China may cut reserve requirements before the Lunar New Year holiday beginning Jan. 23, which will increase demand for cash, Bank of America Merrill Lynch said.

The treasurer pointed out that Australia will begin 2012 with an economy 7 per cent larger than during the 2008 global financial crisis. Although he is pessimistic but realistic about Europe's fiscal situation and hopeful of a U.S. economic recovery, Swan said medium and long-term trends in the global economy would work in Australia's favour.

"We are a large economy in the area of the world that is growing the fastest and has the most potential in the future to grow on the back of productivity improvement and population growth," Swan stressed,

On the domestic economy, Swan said banking reforms recently introduced led to more than 273,000 Australian households taking new loans since exit fees were banned in July. The new rule allowed borrowers to swap their home loans without being penalised.

As of Jan. 1, home loan providers are required to publish a one-page mortgage fact sheet comparing different home loan products, which Swan said would help boost competition among banks.

"We saw that at work in the last two rate cuts with pressure from small lenders forcing the big banks to do the right thing or risk losing customers.... This competition will only increase... banks can no longer assume that once a customer signs on the dotted line, they will stick with them," he told The Sydney Morning Herald.

However, shadow treasurer Joe Hockey criticised the reforms because the ban on exit fees penalised smaller home loan providers who lack fund diversity that larger banks have. Hockey added that legislative intervention on specific banking products will not be effective because banks will recover the sums in other ways.

RELATED STORIES