Moody’s Investors Service says that delinquencies for Australian auto loan asset-backed securities (ABS) and for Australian residential mortgage-backed securities (RMBS) have increased over the six months to July 2016 as well as year-on-year.
Specifically, 30+ day delinquencies for Australian auto loan ABS transactions rose to 1.69% in July 2016 from 1.35% in January 2016 and 1.15% in July 2015.
Delinquencies for prime RMBS transactions rose to 1.51% in July 2016 from 1.35% in January 2016 and 1.24% in July 2015.
“Looking ahead, we expect that delinquencies for Australian auto loan ABS and prime RMBS will rise slightly over the remainder of 2016, because of below-trend nominal GDP growth,” says Alena Chen, a Moody’s Vice President and Senior Analyst.
Chen was speaking on the release of the latest edition of Moody’s monthly Global Structured Finance Collateral Performance Review report.
Moody’s report points out that the 30+ day delinquency rate of 1.69% for Australian auto loan ABS is comparable to the level evident during the global financial crisis in 2009, and is edging towards the peak of 1.87% seen in 2010.
Moody’s forecasts that Australia’s GDP will grow by 2.8% over 2016, which would be below the long-term average of 3.5%.
Moody’s also expects that the pace of house price growth will slow in 2016, particularly in Sydney and Melbourne, where prices increased significantly in 2014 and 2015.
In the three months to 31 August 2016, home prices rose by a weighted average of 2.42% across all Australian capital cities.
A few points:
auto loans are non-revolving so are a better pure economic stress indicator than floating-rate mortgages. They are tracking for worse than the GFC in the next 12 months;
those 21012, 2013 bucket spikes on mortgage arrears have WA bust written all over them so look out CBA (I suspect the collapse in 2014 bucket is a glitch).
Although contained, this is pretty ordinary data when you consider that the business cycle is still pushing on globally. If a shock comes, loan arrears are going to break above recent history highs very quickly.
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.
