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.
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
Via Banking Day: Australian Banking Association chief Anna Bligh has given a commitment that her organisation’s members will continue to provide support to customers affected by the pandemic when the current loan deferral arrangements end next month. The ABA said banks were working directly with customers in hardship to work out an appropriate outcome. Bligh
Several things are working in favour of rising bank valuations favour now. The first is the steepening yield curve which always drives a bid for financials given it represents greater interest income for a borrow short, lend long business. The second is highlighted at Banking Day: Westpac booked an impairment benefit of A$501 million in
Fresh from the central bank: Christopher Kent, Assistant Governor (Financial Markets) Introduction Today I will discuss some recent developments in the foreign exchange market, and provide some views on the role of the Reserve Bank’s various policy measures. I will also briefly discuss a modest change to the way the Bank will be using foreign
In Australia’s scab grab political economy, history (even recent history ) plays no role. It’s a shame because there are, in fact, three distinct phases of the development in the great Australian property bubble. If we understood each then we might end it. So ignorance must be manufactured such that vested interests can continue their
Australian banks are in the process of writing back many of their COVID-19 provisions. That said, there are still some large weeping sores for bank earnings. High touch service sectors are demolished. Commerical property is stuffed by work from home. Both of these trigger pockets of residential stress even as the Frydenberg Unstimulus lands on
Via Banking Day: Greater Bank has set a new benchmark in the mortgage market, cutting its one-year fixed rate by 20 basis points to 1.69 per cent. Comparison site Canstar says this is the lowest mortgage rate in the market. Other low-rate lenders in the Canstar database include UBank, which is offering 1.75 per cent
Roy Morgan Research has released a new survey measuring mortgage stress across Australia. Roy Morgan measures mortgage stress in two ways: Borrowers are considered ‘At Risk’ if their mortgage repayments are greater than a certain percentage of net household income. Borrowers are considered ‘Extremely at Risk’ if the ‘interest only’ component of repayments are over
Via excellent Jonathon Mott at UBS: ONE LINER Solid, clean 1H21 result 2% above Consensus. Better NIM & CET1. Much stronger 2Q. KEY NUMBERS (1H21, continuing operations) (1) Cash NPAT from continuing operations $3,886m (Cons $3,757m); (2) Cash Basic EPS continuing 220cps (Cons 215cps); (3) Interim dividend 150cps (Cons 143cps) 67% payout). RESULT HIGHLIGHTS (1H21,
Via Banking Day legend Ian Rogers: ‘You need a mortgage back book. You need a back office. You need ME!’ This was the pitch from Kim Cannon, the resilient (if aggravated) CEO of non-bank pioneer Firstmac in Brisbane. Plenty around finance have heard similar from Cannon, a near 40-year veteran of fact and fiction around
It’s been two years since the final report of the Hayne banking royal commission was handed to the Governor-General. To date, only 27 of the inquiry’s 76 recommendations have been implemented by the Morrison Government, and what was supposed to be a “watershed moment” in banking reform looks to have become a shocking waste of
Financial Counselling Australia has attacked the Morrison Government’s planned axing of responsible lending laws, claiming the changes will plunge consumers deeper into debt: A report by peak body Financial Counselling Australia found the vast majority of counsellors surveyed want the laws to stay and have used them to get better outcomes for clients drowning in
CBA has updated its internal data series tracking lending across its loan books. It shows that mortgage lending continued to boom in December, signaling strong momentum across the nation’s property market: Key Points: CBA’s data shows that lending for housing continued to grow at a strong pace over the final months of 2020. Lending for
Via APRA banking stats for December. Monthly investor mortgages from the Big 8 rose to their equal highest since the reopening at 0.2% on the month as all majors bar NAB accelerate into the segment: Led by Mad Macquarie: Annual growth is still down -1.8%: The monthly growth rate is still very low historically speaking
The RBA has released its private sector credit aggregates data for the month of December, which revealed a rebound in mortgage growth: A chart plotting the long-run time series is shown below: Overall mortgage growth was 3.5% in the year to December, rebounding from the all-time low 3.0%. A breakdown of owner-occupied credit (0.6% MoM;
Treasurer Josh Frydenberg says the continued decline in loan deferrals shows that the Australian economy is recovering from the COVID-19 pandemic. New Australian Prudential Regulation Authority (APRA) data shows that the total value of deferred home loans fell by $7 billion in December, to just $43 billion. This compares to a peak of $192 billion
As we know, the Morrison Government is seeking to abolish responsible lending rules, in contravention of the Hayne Banking Royal Commission, which recommended these rules remain in place: Under the consumer credit amendment bill, which was introduced in December, responsible lending obligations will essentially be removed from the national consumer credit rules, with the only
Kevin Davis, Emeritus Professor of Finance at the University of Melbourne, has slammed the Morrison Government’s planned scrapping of responsible lending laws, which he argues is “particularly egregious” and a “triumph of ideology and vested interests over logic and evidence”: The axing of responsible lending obligations (RLOs) under the National Consumer Credit Protection Act 2009
Consumer groups have hardened in their opposition to the Morrison Government’s plans to abolish responsible lending laws, which were introduced in 2009. The Financial Rights Legal Centre has urged Senate crossbenchers to vote against any such move, while Financial Counselling Australia and CHOICE warn that scrapping the responsible lending regime would make it easier for
The Morrison Government is under scrutiny over its lack of action in implementing the recommendations of the Hayne banking royal commission. Analysis shows that 27 of the inquiry’s recommendations have been fully implemented to date; another 44 are yet to be implemented, while the government has formally abandoned five of them. The government had committed
Freedom of Information (FOI) documents released on Friday by the Reserve Bank of Australia (RBA) reveals that it saw risks in its decision to cut the cash rate to 0.10%, alongside introducing the Term Funding Facility (TFF) for banks and buying government bonds. In particular, the RBA noted that “a permanent (temporary) 100 basis point
In September MB was left flabbergasted when Treasurer Josh Frydenberg, out of nowhere, announced the government would abolish responsible lending rules. This was a watershed moment in Australia’s transformation into the property equivalent of a narco state given this decision to abolish responsible lending laws directly contravened the very first recommendation from the Hayne Banking
We had previously operated under the wrong assumption that the 30-year decline in mortgage rates had run its course given the RBA official cash rate (OCR) had little further room to fall: That is, with the OCR hitting its lower bound, we wrongly believed that banks would have minimal ability to cut deposit and wholesale
The Australian Prudential Regulatory Authority (APRA) has released data on loan deferrals to November 2020, which reveals that the number and value of deferred mortgages has plunged. The number of mortgage deferrals had shrunk by around three quarters, from a peak of 488,249 mortgages in May to 118,919 mortgages in November. In a similar vein,
The Bank for International Settlements (BIS) has released its global household debt statistics for the June quarter, which reveals that Australian households remain the second most indebted in the world and easily the most indebted among English-speaking nations: Australia also has the third highest debt repayment burden out of sampled nations and by far the
Via Domain: The prudential regulator is investigating online publication The New Daily‘s commercial relationships with superannuation funds as part of a review of how members’ money is being spent by the industry. Liberal Senator Andrew Bragg has been a vocal critic of industry super and last week passed a Senate motion to demand the ABC provide more
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
Via Banking Day: We are all one step closer to an elegant takeover by the Kiwis of Australian financial regulation. To simplify capital calculations for banks, and in turn, capital floor calculations, APRA is proposing that risk-weighted assets of the New Zealand banking subsidiaries of banks be calculated under Reserve Bank of New Zealand rules
