Australia’s banks find their nerve again

Australia’s banks are starting to recover their nerve.

Their confidence collapsed in the second half of 2007, as the global credit crunch hit.

But  their panic passed -in the first quarter of  2008 – and  they began lending again, overwhelimingly to domestic customers.

A bulletin, that the Australian Bureau of Statistics released yesterday, tells the story.

It’s available at www.abs.gov.au. Look for document 5332.0.55.001, called Assets and Liabilities of Australian Securiitisers, March 2008.

A graph tracking  percentage changes in the total assets of Australia’s securitisers plunged in the second half of 2008, as the credit crunch hit.

But it has turned up again, in the first three months of this year, as Australia’s banks, the main securitisers, began to realise that they needed to lend, particularly to home buyers, if they were to make  profits.

The bureau reports that mortgages account for almost 77 per cent of total securitised assets in Australia.

Your home loan might be a big liability to you and your family.

But it is also an equally big asset to your  bank, so long as you keep making the proper repayments.

America’s banks forgot about that need for a while, apparently deciding that they would still have  securitised assets, even if their borrowers could not repay.

That lapse led, firstly, to a great deal of reckless home lending in the US.

It then led to catastrophic losses for the banks, as house prices in the US plunged, removing the banks’ last line of protection.

That, in turn, produced a global credit crunch and produced a set of economic circumstances that the IMF is calling the nastiest seen since the Great Depression of the 1930s.

But the worst of the credit crisis appears to have been avoided in Australia.

That was confirmed yesterday, when the bureau reported that Australia’s banks – and other lenders – increased their stock of long term asset backed securities, in Australia, by no less than $11.8 billion, in the March quarter.

That wasn’t all new mortgage money.

But a lot of it was.  And although Australia’s house prices have eased, in many places, over the past few months, that should be enough to stop an outright collapse in the domestic housing market.

Australia’s banks still haven’t learnt to trust foreigners again, though.

The bureau also reported that the proportion of “asset backed securities” that Australia’s banks and other lenders have  issued overseas” fell  3.8 percentage points, in the March quarter.

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