Australia’s New South Wales state government might not have responded with alacrity to the global credit crunch but it has now made decisive changes to the way local councils are able to invest their funds.

Spooked by the prospect of up to A$400m ($369m) in losses from investments in what in hindsight seem wildly inappropriate collateralised debt obligations, the state’s 152 councils have been ordered to avoid the racy world of structured finance products altogether.