Deposit growth goes bye, bye


APRA has released its February banking statistics and deposit growth is going bye, bye on the month up just 0.1% and year on year growth is down to 6.6%. Here’s the aggregate chart with a plateau forming:


The month on month chart which is fading:


The year on year chart which is tumbling:


It doesn’t take Einstein to figure out more savings are going into assets now or just being spent. And there will be less savings too as national income keeps falling. I expect we’ll see the savings trend in the first quarter national accounts begin to fall too.

We are one uptick in credit demand away from the banks rushing into wholesale markets for more dough. Not that that’s a problem for the new and improved fast and loose RBA. What are you going to do APRA?

MBS February 2013

David Llewellyn-Smith
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  1. GunnamattaMEMBER

    Yep, back to those wholesale markets.

    With a system lending 2/3 to mortgages stumping up the collateral. And an AUD nailed to roof minimising AUD benefit now, while maximising Forex impact later, while hanging like a sword over job security.

    And austerity, we need to do something about public spending very quickly.

    • For you in good faith gunners, keep the bastards honest:

      As part of the 2013 budget in Canada, the Minister of Finance tabled the Economic Action Plan 2013 which included the newest buzzword ‘bail-in’.

      Page 145
      “The [Canadian] Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants. Systemically important banks will continue to be subject to existing risk management requirements, including enhanced supervision and recovery and resolution plans.
      This risk management framework will limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are ‘too big to fail’.”

      A depositor is an unsecured creditor to a bank. The Canadian government presents its position to be one of shielding the taxpayer from the need to pay for bailing out a failing bank. As a taxpayer that is comforting.
      However as a depositor, the phrase “rapid conversion of certain bank liabilities into regulatory capital” concerns me. My deposit is the bank’s liability. Could depositors’ funds fall under the definition of ‘certain bank liabilities’?
      I searched the entire 442 page document and I cannot find where the term ‘certain bank liabilities’ is defined.
      The prudent approach I believe would be to assume that under certain conditions, certain bank liabilities will include depositors’ funds; at least those funds in excess of CAD 100,000 which is our so-called insured amount.
      Even if it has noble intentions now, under a credit and derivatives collapse scenario, it is conceivable that the Canadian government could be coerced or bullied by external agents into grabbing depositors’ funds just like what is happening in Cyprus.
      I find the newest ‘bail-in’ term being used since the Cyprus debacle quite amusing. It reminds me of the ‘sit-in’ and ‘love-in’ terms of the peace/hippie generation.
      We all seem to be floating on the bathwater of fiat currency liquidity. The tub is being drained at the opposite end from where we are floating. The EU is circling the drain. The central banks are feverishly trying to replenish the tub with thimbles full of water, but it appears inevitable that some will go down the drain, whilst others will be left high and dry. The central bankers only have thimbles, not a drain stopper.

  2. Has Australia adopted the European model, where we accept that it’s ok to spend, borrow and spend some more now and worry about how to pick up the pieces later? If spending on the never never, mopped up by bailouts has worked for Europe, perhaps they’ve just decided that there’s no use pretending that we’re any different. It’ll all be someone else’s problem anyway, so why worry? Just get some more debt and rejoice in the consumption that it brings.

  3. Diogenes the CynicMEMBER

    Nobody could have foreseen this. Right?

    If you cut interest rates, people shift their money out either by spending or searching for higher yield. But no doubt the RBA will keep cutting…

  4. I would have thought a 10% savings rate indicates that the locals are still paying down debt and whatever borrowing is happening isnt going into housing which is a c GDP nominal growth rates or below.
    And if you think RBA’s Debelle assertion that ratings agencies will penalise term borrowing over deposits, banks will only lend what they can raise in deposit markets so very little chance of a lending boom.
    And I suspect that any overseas borrowing is hedged, so the only group that suffers from a fall in the AUD will the domestic banking systems counterparties, so there is no direct fX impact

  5. That s sure, everyone with at least 2 neurons are getting get their cash out of the banks into hard assets.We can see that houses are selling with very little credit growth.

    • Houses are selling as SMSF’s are using the property losses to increase their cap contributions and decrease their wages tax. A rort that must be stopped soon….

      • I’m not seeing any government willing to do anything about the various tax “incentives” in RE. Piss off a lot of baby boomers, and they get nasty, and vote you out. No matter what stripe of political bent the government of the day is, they all share one thing in common, and that’s their desire to not be voted out.

        On the super side of it, that’s a bit more tricky. a) people hate it, and b) given the government effectively forces you to lock your money away long term, there really does need to be a great deal of stability inherent within the regulatory framework so people can actually make an investment decision. On this front, whilst what you described may be a “tax dodge”, it was legal when people made that investment decision, and it was presumably made with the implicit understanding that it would remain legal. I would suspect any such change would by necessity have to be grandfathered.

        NB: I have no dog in this fight, and am not investing in anything like the above. Just some thoughts.

      • innocent bystanderMEMBER

        … SMSF’s are using the property losses to increase their cap contributions …

        you keep saying this but I can’t see how it can change your cap.
        sure an income earner can contribute/sal sacrifice more, up to their cap, and that attracts less tax inside their super, but that is true regardless, and there are tax advantages for any assest appreciation inside super not just property.
        the real advantage is once your super is in pension mode then profits are tax free so if you sell the property for a CG then the CG is tax free – so the investor has to wait till pension mode to take advantage of that – and hope the govt doesn’t chnage the rules in the meantime about tax on super income or super pension – are you feeling lucky? do you think property is going to appreciate?
        personally I think someone borrowing inside their super and running the property at a loss is taking too big a risk. one day they might find there is not enough income inside their super to pay the mortgage.

      • don’t see any rort in that. Don’t see any effect on the cap. People are legally correct. Given the martin Armstrong property predictions why would an investor hold onto property…wait longer for more losses?

  6. I would ahve thought that the level of deposits is proportional to the amount of credit in the system. Evn if someone withdraws money to purchase a property it ends up in someone else’s bank account. Perhaps the sluggishness of credit growth combined with the paying down of debt as interest rates fall is the answer. If mortgage holders continue the same level of repayments in a falling IR environment then there is a removal of money from the system.

    • Australian mortgage holders are $160B ahead of repayments, so $160B has been taken out of the system. That’s a lot of cash.

      But we are still saving at 6.6% Eventually the public will become satisfied with their savings levels and their debt levels, and they will begin to spend again. It looks as though we are heading towards that end now.

      • Perhaps they are happy with their free cash levels rather than satisified with their debt levels and are sick of the perceived austerity, so are willing to spend the increased extra free cash from interest rate cuts for a while, but not yet willing in the main to increase their debt.

  7. I’ve decided I won’t accept less than 5% for TDs.
    In Feb I moved > 250K from TD to one of my favourite fund managers, and it looks like another of my favourite fund managers will get the funds from another >250K TD that matures in couple of weeks.

    I’ve invested long enough not to lose sleep watching capital value fluctuate; in the long run I think my funds will fare as well (or better) when managed by these managers as they will floundering in sub 5% TDs.