Saturday, June 27, 2009

Is it Time to Start Worrying about the Australian Banks?

This is the first piece in a two part series on the Australian and New Zealand banks. The initial post focuses on the macroeconomic issues facing these countries while the second one will focus on the banks themselves. We all know what has happened to the banking system in the US as a result of falling house prices. Could the AU-NZ banks be in for the same sort of fall? Some data indicates that answer could be yes. Not to spoil the surprise but it looks at though some of the major factors that have plagued the US housing market are to some extent present in this region as well. The most important of those is, of course, the dreaded consumer leverage.

I haven't seen a whole lot of press in the US on the housing market in the AU-NZ footprint and I think some of the similarities are eye opening and could suggest that the market may be on the same precipice the US market was about to fall over in late 2006.

I have kept the document in the Scribd format to preserve the formatting of the charts and quotations. Next week sometime I will post a detailed review of the individual banks in an attempt to figure out if there are any long or short candidates in the group. In the meantime I would love to hear you comments. Enjoy!

(Picture courtesy of

Australia-New Zealand Banks