This paper targets the question of why the Australian economy dealt so well with the global financial crisis in the period July 2007 – February 2010. Part One investigates the question from a descriptive angle, providing a brief outline of the conditions in various domestic markets. In Part Two, econometric tools are employed to construct a model of the Australian dollar. The short‐run dynamics are addressed and the results indicate that while some influential factors have changed the direction of their impact on the floating Australian dollar, other relationships have remained intact or even strengthened during the financial crisis. The empirical results imply that part of the explanation can be ascribed to the exchange rate and how it acts as a shock absorber for the domestic economy.