Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, point out that the RBA’s semi-annual Financial Stability Review featured a list of risks to the financial sector and, by extension, households.
Key Quotes
“Negative equity, non-performing loans and defaults were featured in Box B. According to the RBA, ~1 ¾% of loans have an LVR between 95-100%, and claims that negative equity is likely to remain low (unless national house prices collapse by 30% or more). In contrast, negative equity peaked in the U.S. at over 25% of mortgages in 2012 and in Ireland it exceeded 35%, as peak to trough house price falls exceeded 30% and 50% respectively.”
“The RBA remains confident in the resilience of the financial sector, especially when bank balance sheets could cope with a double-digit unemployment stress test. The last time the unemployment rate was double digit was in 1994. The RBA claims that the low unemployment rate provided a significant buffer for households during this house price correction. March employment is released 18 Apr, where we look for +17k (mkt +15k) and a 5% unemployment rate (mkt 5%).”
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