MacroBusiness covers Australian banks from the perspective of their macro-economic role, as political economy actors, as investment propositions and in terms of financial stability and capital adequacy. Australian banks have played a crucial role in inflating the Australian property bubble, exist within an utterly privileged position as “too big to fail” institutions and operate within a deeply distorted financial architecture that has Australian tax payers well and truly on the hook in the event of trouble. MacroBusiness seeks to define this role for investors as well as change it in the name of the Australian national interest.
I have to write this story every few years. Whenever we have a positive iron ore cycle, investors make the same old mistakes. In particular, they assume that the mining cycle of plumped-up dividends is sustainable: SMSFs have gone shorter banks for fear of lower dividends. They have rotated to miners for higher dividends. The
As much of the press tips into phony handwringing over house prices again, even as it relies entirely on the bubble for its only source of profit growth, Chris Joye is having none of it. He argues that: Property is the cheapest it has been in a very long time. Buyer incomes have been lifted
Several commentators have questioned the efficacy of Australian financial regulators imposing macroprudential mortgage curbs, arguing that it would disproportionately harm first home buyers (FHBs) who tend to take out larger mortgages with smaller deposits: Alison Pennington, senior economist at the Australia Institute’s Centre For Future Work, claims macro-prudential tightening “would have unequal and unfair consequences
New data from the Australian Prudential Regulation Authority (APRA) shows there were only $14 billion worth of loans that were still on a deferred repayment plan at the end of February 2021. This comprises $11.7 billion worth of mortgage loans and $1.5 billion of loans to small and medium enterprises (SMEs): The contrast with the
As we know, the Australian Prudential Regulator, APRA, is corrupt. Its head, Wayne Byers, was re-appointed by Treasurer Frydenberg in the midst of the Hayne Royal Commission before it could bring down its findings on anything. A clear ‘jobs of the boys’ moment rendered appalling as the Hayne RC made clear how badly APRA had
APRA chairman Wayne Byers today in parliament: “It’s not our job to solve house prices and its nor our job to solve house pricing affordability. The extent to which there is dynamic emerging of increased risk taking by the community … at this stage it’s not evident.” “I would probably start by clarifying the way
Late last year, the Reserve Bank of New Zealand (REINZ) announced plans to increase tier one capital requirements for all systematically important banks to 16% of risk weighted assets, up from 13.5%. New Zealand’s big four Australian-owned banks were, therefore, placed directly in the REINZ’s cross-hairs given they comprise nearly 90% of the nation’s banking
Mwahaha. Here’s a discussion that we are yet to have. There’s no doubt in my mind that the RBA and APRA will be ‘hands off’ the property market this year probably much of next. But, there is also the bond market to worry about. As ANZ says: Fixed-rate mortgage rate hikes will happen in H2,
CoreLogic’s head of research, Eliza Owen, agrees that Australia’s financial regulators are unlikely to act quickly to rein-in ‘risky’ mortgage lending via macroprudential tightening. First, Owen notes that the proportion of interest-only lending remains at low levels (19.2% in December 2020), less than half the mid-2015 peak (45.6%): Second, while the proportion of mortgages made
The AFR is today reporting that house price controls are imminent from regulators: Apparently “pressure” is building on the RBA to slow house prices though from where that pressure is coming the article does not say (because let’s face it, there isn’t any). RBC says the RBA is readying macroprudential tools. These will include limits
CoreLogic has released its March Housing Market Update report, which contains the below chart showing the sharp fall in mortgage rates over the past year across various owner occupied and investor loan types and terms. Specifically, the average housing lending rates for new loans declined 70 basis points for owner occupiers, and 70 basis points
In recent weeks we have seen mortgage rates ratchet lower despite no change in the RBA cash rate. Westpac last week announced that it slice its two and three-year fixed mortgage rates by up to 20 basis points to a record low 1.79% (two-year), 1.88% (three-year), and 1.89% (four-year). This week, Homestar Finance launched the
A lack of support in the Senate has prompted the Morrison Government to put its draft legislation to abolish responsible lending laws on the backburner until at least June. Consumer Action Law Centre CEO Gerard Brody has urged senators to reject the legislation if and when it returns to the upper house, arguing that banks will
The Morrison Government recently put its proposed changes to responsible lending laws on hold, with the Senate now scheduled to vote on the bill in June. Banking industry leaders have been lobbying senators to pass the reforms, with National Australia Bank CEO Ross McEwan contending that scrapping the responsible lending laws will not result in
The Australian Bankers Association (ABA) yesterday released data on its members’ deferred loans, which shows the mortgage cliff that was towering over Australia’s property market last year has shrunk into a molehill, down 97% from its peak at the end of February: In raw numbers, there are now only 22,480 mortgages still under deferral, down
Despite the RBA cash rate remaining at a record low 0.1% for five consecutive months, Australian mortgage rates continue to drift lower. According to the RBA’s indicator lending rates, the average owner-occupied discount variable mortgage rate was a record low 3.65% in February, whereas the average 3-year fixed mortgage fell to only 2.19%: Rates available
Via George Tharenou at UBS: Higher risk home loans up significantly in Q4 across DTI, LVR and IO shares We previously argued that macroprudential policy tightening by regulators (via the CFR, which includes APRA and the RBA) is just a matter of timing (& is instead of rate hikes). Indeed, the CFR said they are
Having swung from beloved Premier to banking lobbyist, it is clear that “Evil” Anna Bligh is the greatest public policy apostate in the Australian political economy (and that’s saying something). Yesterday, at The Australian, it was revealed that Belzebub’s handmaiden has summoned the two treasurers to Hades for a hot policy poker in the freckle:
On Friday, the Senate Economics Committee released its assessment of the Morrison Government’s planned axing of responsible lending rules, which supported winding back regulations to support greater credit provision across the economy: The committee notes that a well-functioning credit market is essential for economic growth generally, and for Australia’s recovery from the COVID-19 pandemic specifically.
The floor continues to fall out from under the mortgage market, especially with respect to fixed rates. Since the beginning of the COVID-19 pandemic, fixed mortgage rates have experienced much bigger declines than variable mortgage rates, providing borrowers with opportunities to make big savings on their repayments. As shown below, the average rate applying to
Economists and consumer groups have warned that the Morrison Government’s announced axing of responsible lending laws will fuel property inflation by enabling borrowers to take on more debt and bid up prices. Under the Government’s consumer credit amendment bill, which was introduced in December, responsible lending obligations will be removed from the national consumer credit
Just last week, Reserve Bank of Australia (RBA) governor Philip Lowe stated that lending standards remain sound but warned that they must continue to remain so given historically low interest rates and the recent surge in house prices. The Council of Financial Regulators (CFR), which is the coordinating body for Australia’s main financial regulatory agencies
History doesn’t repeat but it sure does rhyme. With Australian property values commencing another strong upswing, the ‘bank of mum and dad’ is once again back in vogue. In January 2020, just prior to the COVID-19 pandemic, a survey showed that more than half of Australian parents were directly subsidising the lifestyles of their children,
As we know, the RBA is on record saying that it won’t raise interest rates before 2024 and that it is quite happy for house prices to rise for the economy to enjoy the economic spillovers. My own view is that not only will the RBA not raise rates in 2024, but it will also
Record low interest rates and households awash with stimulus money is having interesting effects on Australian borrowing habits. On the one hand, Aussies are taking advantage of the lowest borrowing rates on record to pile into the housing market, with new mortgage issuance running at all-time high levels in January, according to the Australian Bureau
The Australian mortgage market has continued its record run, according to new data released today by the Australian Bureau of Statistics (ABS). Total mortgage commitments (excluding refinancings) rose another 10.5% in January to be up a whopping 44.3% year-on-year. This growth was driven by owner-occupiers, where mortgage commitments rose by 10.9% over the month to
The Reserve Bank of Australia (RBA) has released mortgage growth figures for January, which continued to strengthen on the back of owner-occupiers. Quarterly mortgage growth rose to 1.14% in January – the 6th consecutive monthly increase – and is now experiencing its strongest growth since September 2018 (see next chart). Owner-occupiers continue to lead the
We noted this week that mortgage applications are now so hot that banks are unable to keep up and approval times are blowing out spectacularly. House prices are on the march too. FOMO is loosed and there is no prospect of higher interest rates for years. So freshly listed Liberty Financial is enjoying an unexpected
Fixed rates are all the talk in Australia’s mortgage market. Over the past year, fixed mortgage rates have experienced far larger declines than variable mortgage rates, thus offering borrowers huge opportunities for savings. As shown in the next chart, the average rate applying to existing 3-year fixed owner-occupied mortgages was only 2.20% as at January
All recent data shows that Australian mortgage demand is white hot. The official lending commitments data from the Australian Bureau of Statistics (ABS) showed that the value of new mortgages (excluding refinancings) issued in December surged to record highs following explosive 31% year-on-year growth. This growth was driven by owner-occupiers, where the value mortgages issued
