July 16, 2018

Australian Markets Weekly – More on bank lending standards

In today’s Weekly we review the important speech by APRA Chair Wayne Byres last week, which covered developments in housing lending standards.

For the full details, download the full report: Australian Markets Weekly 16 July 2018


  • In today’s weekly we review the important speech by APRA Chair Wayne Byres last week, which covered developments in housing lending standards. The key takeaway for us was that any further tightening standards are expected to be “at the margin”. This is in contrast to the views of a number of commentators that have been warning of a further substantial tightening in standards as an outcome of the Royal Commission into Financial Services.
  • These views dovetail well with NAB’s latest economic forecasts released last week (email us to be added to this monthly publication). These suggest the risks for growth remain mostly balanced, although funding pressures and trade/tariff tensions are important to monitor going forward.
  • Just two events on the Aussie calendar this week: the RBA Board Minutes on Tuesday and the important Labour Force Release for June on Thursday.
  • Interest in the Minutes will be around the no-doubt fuller discussion of pressures in short-term funding markets, as well as any slant on the RBA’s thoughts on trade tensions. The section that noted an appreciating currency would slow the recovery in the economy and return of inflation to target was dropped from this month’s Board statement, so any clarification as to why would be of interest to markets. On the Labour Force, we look for a slightly softer than market employment outcome of +10,000, reflecting some easing in leading indicators in recent months and some continuing correction in the ABS print after very strong measured employment growth last year. That said, there’s probably some upside risk about that forecast as our experimental internal indicators rebounded in June. The unemployment rate is expected to remain at 5.4%.
  • Globally, trade developments will remain a key focus for markets, together with President Trump’s ongoing tour of Europe and associated pronouncements! On the economic front, the key items of interest are likely to be Fed Chair Powell’s semi-annual testimonies and the Fed Beige book in the US, though the Monetary Policy Report released on Friday produced few surprises.
  • The latest Chinese GDP and monthly data deluge are also important for clues as to whether Chinese growth has continued to slow. At the same time, US events will be examined for any clues as to how the confidence of businesses is being affected by the US-China trade dispute and to whether the Fed will treat any tariff-related increase in inflation as temporary.

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