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Opinion: Avoiding Australia’s bank funding crisis-to-be

Date: 16 Jul 2010

The country’s major lenders have well-documented wholesale funding needs that are only projected to grow in the coming years. The banks need to find new investors and cut their lending books, or the entire nation faces a financial crisis.

Keywords (click to search): [Australia] [opinion] [editorial] [debt] [banks] [NAB] [Joseph Healey] [Reserve Bank of Australia] [CBA]

Richard Morrow

“There’s a big reason Australia usually doesn’t have a fiscal deficit,” a senior banker tells Asiamoney in Sydney. “The banks carry it instead.”

Australia has gained many plaudits for having adroitly danced around recession and returned to decent economic growth. Jealous western observers point to its thriving commodities industry and a lack of the same consumer excesses witnessed in Europe and the US.

The truth is much less pleasant. The country has not avoided the credit time-bombs that have detonated in the faces of so many western peers; its debt explosion just has a longer countdown.

Household debt in Australia has surged during the past two decades, from US$218 billion in 1995 to US$1.24 trillion, including mortgages. Average household debt is equivalent to just under 150% of disposable income; more than the country’s GDP of around US$1 trillion.

Much of this...

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