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.
The Reserve Bank of Australia (RBA) has released mortgage growth data for March, which reveals that Aussie mortgage demand continues to soften. Quarterly mortgage credit growth slowed further to 1.9% – down 0.2% from January’s 12-year high: Nevertheless, owner-occupiers continue to drive mortgage growth, rising by 2.0% over the quarter versus 1.7% growth for investors:
It has been 11 years and seven months (November 2010) since the Reserve Bank of Australia (RBA) last lifted the official cash rate (OCR) from 4.50% to 4.75%. Since then, the OCR has has fallen relentlessly to its current record low of just 0.10%: Therefore, literally a generation of Australian home owners has never experienced
The Reserve Bank of Australia (RBA) has updated its monthly mortgage data, which shows rates rising rapidly before an increase in the official cash rate (OCR), As shown in the next chart, fixed mortgage rates for new borrowers have climbed sharply since bottoming in the first half of 2021: After bottoming at just 1.95% in
Last week’s federal budget contained various measures aimed at enticing first home buyers (FHBs) into the housing market. In particular, the Home Guarantee Scheme was more than doubled to 50,000 places, thus enabling single parents to buy a home with a deposit as low as 2% and FHBs to purchase a home with a 5%
The Council of Financial Regulators (CFR) – the coordinating body for Australia’s main financial regulatory agencies and comprises APRA, ASIC, RBA and Treasury – this week released its quarterly statement, which suggested that macro-prudential mortgage restrictions are still on the agenda with the focus likely to be on curbing highly leveraged mortgage lending: A particular
On Tuesday, the Australian Prudential Regulatory Authority (APRA) released data on high debt-to-income (DTI) new mortgage lending. According to APRA, the percentage of new mortgages taken out at a debt-to-income ratio above 6 times hit a record high 24.4%, up from less than 15% in early 2019: Since March 2019, $264 billion worth of mortgages
There are three sources of stress piling up upon bank funding costs. The first is we have discussed before the possibility of commodity price shocks feeding banks into banks. US FRA-OIS remains wide though has not gotten worse: More symptoms of commodity financing stress are appearing following last week’s nickel blowoff: Trafigura Group, one of
As we know, Australian households are the second most indebted in the world, according to the Bank for International Settlements. Yet, this risk factor is often downplayed on the basis that the majority of Australia’s household debt is held by those most able to service it (i.e. high income earners). CoreLogic has released data on
In 2020, we saw a blowoff in stimulus. In 2021, we saw a blowoff in growth and equities. So far in 2022, we have seen a blowoff in inflation and commodities. Now we are seeing a blowoff in interest rates and bond yields: Banking funding costs have started to spike too: The Aussie curve is
Federal Treasurer Josh Frydenberg has flamed the hysteria over interest rates, warning voters that markets are predicting 2%-plus of interest rate rises over the next two years: Treasurer Josh Frydenberg has warned Australians to brace for higher interest rates… In an exclusive interview with The Sunday Age and The Sun-Herald, the Treasurer put Australians on
In today’s Macro Breakdown I discuss why I believe that Australia’s household debt load – ranked second highest in the world – poses a problem for the Australian economy in the era of rising interest rates. The video showcases recent data on household debt, debt repayments and mortgage rates as provided by official sources and
The Bank for International Settlements (BIS) has released its global household debt statistics for the September quarter of 2021. This data shows that Australia still has the second highest stock of household debt in the world when measured against the size of its economy, as measured by Gross Domestic Product (GDP). As shown in the
Earlier today I showed how fixed rate mortgages have ratcheted up, rising by 14% (1 year) to 45% (five year) since bottoming last year: Now Citi banking analyst Brendan Sproules is warning that average mortgage repayments could jump by between 25% and 35% as special home loan deals reset: While fixed rates protect borrowers from
Westpac has the note: Fears around funding have started to impact rate sets pushing BBSW higher despite little reason for a sustained AUD funding squeeze. BBSW rate sets have been rising fast 3m BBSW vs 3m US CP Swapped into AUDBBSW rate sets and BBSW-OIS spreads (left chart) have been widening rapidly, with 3m BBSW
While economists continue to debate the timing of when the Reserve Bank of Australia (RBA) will begin to lift the cash rate from its all-time low of 0.1%, Australian fixed fixed mortgage rates continue to ratchet higher. Data released yesterday by the RBA shows that new fixed mortgage rates rose further in January, while variable
This is some monetary egghead stuff but it is very important. TD Securities: US Funding Stress: Ripples in the Water •Bank unsecured funding levels have risen amid the financial reverberations of the Ukraine invasion. CP-OIS, Libor-OIS, and cross-currency basis have all widened. However, we argue that this is more a function of markets pricing in
Last year, Treasurer Josh Frydenberg drafted legislation to wind back of responsible lending laws, telling reporters they are essential to helping the economy recover from COVID: “Ensuring consumers and small businesses can get timely access to credit as the economy continues to recover from the COVID crisis”. “The reforms are intended to improve efficiency, reducing
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of December. Quarterly mortgage credit growth rose to 1.97% – the highest growth rate since since April 2010: Owner-occupiers continue to drive mortgage growth, rising by 2.4% over the quarter versus 1.2% growth for investors: Meanwhile, annual mortgage
Lender Firstmac believes that debt-to-income mortgage curbs are on APRA’s agenda: Brisbane-based Firstmac… argued the regulator seemed poised to introduce some new steps. “We’re probably not far away from a second round of macro [intervention], which will most likely be debt-to-income ratios,” [chief financial officer James Austin] said… [Firstmac said] such a ratio would potentially limit
As regular readers know, I consider the growth in new mortgage commitments to be the key indicator or property prices. The latest ABS housing finance data for September showed that mortgage growth has slowed sharply. And since nearly every home in Australia is purchased with a mortgage, this falling mortgage growth historically points to slower
The Bank for International Settlements (BIS) has released its global household debt statistics for the June quarter of 2021. This data shows that Australia still has the second highest stock of household debt in the world when measured against the size of its economy, as measured by Gross Domestic Product (GDP). As shown in the
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of October. Quarterly mortgage credit growth decelerated further to 1.8% after recently recording the highest rate of growth since 2015: Owner-occupiers continue to drive mortgage growth, rising by 2.3% over the quarter versus 0.8% growth for investors: Meanwhile,
The Australian Prudential Regulatory Authority (APRA) yesterday afternoon released its new “more risk-sensitive” bank capital framework, which incentivises banks to lend to lower-risk owner occupiers rather than higher risk investors: The framework, developed over four years of consultation, will help to ensure Australian banks continue to have the financial strength to withstand future adverse economic
The Australian dollar is sitting right on vital support as markets digest Omicron. So far it has held but a break of support here opens big downside potential: The ASX200 has gapped 1.2% at the open but is being aided by firm American futures: Yields are rising as risk diminishes. Markets have this completely backwards.
It’s been the bubble that just won’t die. The CBA, ponderous utility with a dying business model, was misrepresented as some kind of new-age unicorn. This silliness handed it the most expensive multiple in world banking, and 50% above a peer group from which it is indistinguishable: The problem is, with such a growth multiple,
