by Alan Thornhill
The Reserve Bank believes Australian families – and businesses – are not generally under financial stress.
This became evident when the bank’s Governor, Glenn Stevens, released the minutes of a board meeting the bank had held earlier this month.
The central message was clear.
“The household and business sectors in Australia did not appear to be under financial stress,” the bank said.
However it also acknowledged that families and businesses, alike, are still wary about borrowing.
“…. both continued to show more caution in their borrowing behaviour,” it added.
The bank said this is reflected ” in slower rates of credit growth over the past couple of years.”
Our central bankers were, frankly, pleased.
“Members saw this as a welcome development,” Mr Stevens said.
He said this was especially so, as:”…household debt remained at a historically high level.”
Mr Stevens acknowledged, though, that debt-servicing expenses had risen recently as a result of higher interest rates.
“Members also noted that some sectors (for example, small property developers) continued to experience difficulty in accessing funds,” he said.
The board acknowledged, too, that the profits of Australian banks are now, generally, back to pre-crisis levels.
“In Australia, profits and returns on equity had recovered to near pre-crisis levels for the largest banks as bad debt expenses declined,” the minutes noted.
The Reserve Bank noted, too, that contributions to Australian bank profits were also coming from growth in net interest income as well as insurance and funds management activities.
“Overall, non-performing asset levels – mainly reflecting troubled commercial property exposures – had stabilised over the past year,” Mr Stevens said.
He admitted though that flooding and other recent natural disasters would reduce short-term profits in some parts of the financial sector, but said the overall impact of these events is expected to be limited.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
Sunday May 19
The Dow Jones Index rose 121.18 points Friday,New York time) to 15,354.40
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