Via the excellent Jonathon Mott at UBS:
Australian economic recovery keeps surprising
Over the last month a raft of economic data has surprised on the upside. Home lending; building approvals; retail sales; car sales; trade data and GDP all exceeded expectations. Additionally, new COVID-19 cases across Australia have approached zero (outside hotel quarantine) allowing many restrictions to be removed and most interstate travel to be re-opened. Consumer and business confidence have rebounded solidly.Credit risk is falling
Given the improved environment, we are becoming increasingly comfortable with the outlook for credit impairment charges for the banks in Australia and NZ. (1) Within the institutional businesses there have only been a couple of corporate collapses this cycle (Virgin Airlines and Grocon), with ECM raisings and DCM liquidity helping to improve the credit outcome; (2) Although not all small businesses are out of the woods, the outlook for SMEs appears to have turned the corner; (3) House prices are rallying (sharply in some areas) given record housing lending volumes and near zero rates. Recent RBA comments indicate Australian regulators are not considering implementing macro-prudential policies yet, in contrast to the RBNZ. This implies mortgage losses are likely to be manageable despite elevated unemployment.
