 Australian banking holds under pressure
The Reserve Bank has released its financial stability review and has praised Australian banks and the banking industry for shrugging off the global financial crisis.
Mortgages account for 60 per cent of total lending, say the RBA.
The housing market in Australia has shown remarkable resilience to the global financial crisis with house values remaining steady or increasing and a booming first home buyer market.
Non-performing home loans were well below rates seen in the US and in Britain. In the US the ratio of NPLs is 5.7 per cent and in Britain it is 2.4 per cent. Meanwhile, here in Australia it sits at just 0.62 per cent, which is up from 0.49 per cent this time last year.
The RBA report helps explain the strong performance of the Australian banking sector at a time when Britain and the US have experienced a housing slump on top of a banking crisis, resulting in a rash of government bailouts.
The RBA conducted a stability review in March and highlighted several reasons for why our banking system remains so strong.
Our banks avoided the subprime market and our lending standards have been much higher.
Australian banks are also under more pressure to make responsible lending decisions.
While the world struggled with the global financial crisis, many governments moved to bailouts and stimulus packages. Australia has not needed the scale of bailouts seen in the US and the UK, but the Rudd government was quick to guarantee all deposits and offer cash handouts.
Two stimulus packages saw the first home owners grant increased temporarily. The grant for those buying their first home rose to $14,000 and to $21,000 for those building or buying a newly constructed home. But as of October 1 the grant falls to $10,500 and $14,000 respectively. Then after January 31 the grant reverts to the original $7,000 for both categories.
There was also a cash handout for many Australian's in the stimulus packages as well as rebates for solar installations in housing.
As a result of this government spending, we did avoid a technical recession but the surplus from the last budget is all gone.
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