Australian banks Australian interest rates

Sell Aussie banks on macroprudential?

Monday, 4 October 2021

Without putting too fine a point on it, macroprudential tightening has been bad for Aussie banks in the past. The last time a campaign was launched, Aussie banks fell for five years and diverged enormously from US banks:

There were other factors. The Hayne Royal Commission and COVID-19 but I’m sure you get the point. Banks don’t like macroprudential tightening. It stalls front book growth and squashes back book margins as funding rates fall, plus it lifts delinquencies.

There are two other reasons for concern today. First, bank valuations are just as high as 2015 and CBA remains crazy:

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About the author

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.