September, 23 2016 by lsr team

The RBA’s shift to a neutral bias at its meeting in September, following 50bps of rate cuts in 2016, did not come as a surprise. Perhaps more interesting was the discussion of the most recent collateral damage in the global monetary policy race to the bottom. Officials took note of the distortive impact of the BoJ’s policies on Australia’s repo market, manifested in rising repo rate spreads relative to the RBA’s cash rate. In turn, persistently high repo rates put upward pressure on Australian banks’ funding cost base, further strengthening the...

March, 22 2016 by lsr team

Households have been borrowing more and saving less, suggesting their finances are increasingly vulnerable to shocks – not least in view of stretched property market conditions. This is a topic that was repeatedly raised during out recent visits to Australian clients. Spurred by easy monetary policy and a buoyant property market, the leverage of households –predominantly mortgages- has risen to a record 1.8 times income. At the same time, their savings ratio has been declining through the RBA’s extended easing cycle, raising questions about the robustne...