RBA – risks to Australia economy from China remain elevated

Reserve Bank of Australia Financial Stability Review

  • financial system resilient, banks well capitalised and profitable
  • bank capital ratios close to or above “unquestionably strong” targets
  • overall funding costs for banks has declined over the past year
  • risks to bank capital from past misconduct “appear limited” so far
  • high household debt, riskier lending of recent years remain macro-financial risk
  • risks have abated somewhat due to prudential measures, tighter loan standards
  • small minority of borrowers with interest only loans to face difficulty with refinancing
  • most indicators of household financial stress remain fairly low
  • around A$480 bln of interest only loans to expire between 2018 and 2021, 30 pct of mortgage credit
  • step-up in mortgage payments on these loans could be between 30-40 pct
  • but several factors suggest any increase in financial stress will not be widespread
  • commercial property still hot in Sydney and Melbourne, some banks concerned at low yields
  • potential risks from large apartment pipeline have not materialised as yet
  • Asian banks account for 12 pct of total business credit, has doubled since 2012
  • Australian households coping with financial stress, but bears watching

(those quick headlines are via Reuters, bolding mine ) 

Bloomberg have a slightly different take with their set of headlines, just a little more wary:

  • Detrimental shock could lead to lasting correction in mkts
  • Australian fin. system resilience has been strengthened
  • Some interest-only borrowers seeing repayment difficulty
  • Conditions in commercial property remain an area to watch
  • Global mkts pricing in little chance of adverse outcomes
  • Risks to Australia from Chinese economy remain elevated

This review is a twice-yearly publication from the RBA

My take is this is a balanced report (as usual) from the RBA. yes, there are risks. yes, there is also good news.

Carry on. 

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.