Foreign bond deluge

This blogger tracks Australian bank’s foreign liabilities using the ABS’s National Accounts: Financial Accounts. It aggregates the bonds our banks sell to oversees investors. June quarter figures were just released and show that our banks now owe $323.9 billion on bonds with maturities above one year. And another $83.3 billion in bonds with maturities under one year. A total of $407.2 billion and up an unbelievable 4.5% in the quarter. Crikey! That is an annualised growth rate of 18%.

It appears there is some cycling of funding types going on, with bills of exchange falling $6 billion. However, that is not a terribly reassuring fact either. A great new post by The Unconventional Economist draws and quarters the Great Australian Housing Bubble and includes RBA statistics pulled from statistical table B3 on Australian bank’s foreign liabilities – see the chart above. When we look at the RBA figures, the total of foreign liabilities rises again, to above $500 billion. Presumably the extra liabilities are made up by bills of exchange and foreign deposits, amongst other items. And one has to seriously wonder, when push comes to shove, just how sticky will these sources of funding be.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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