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 www.iusb.edu/~sbglobal/passport.html)
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3 comments:
Great research! If you are looking for someone knowledgeable about australian banks you may want to visit bronte capital. John Hempton writes the blog and he is an expert on australian banking. Look forward to your second piece.
Check out graph 15 near the end for Oz system LTVs.
http://www.rba.gov.au/Speeches/2009/sp_so_150409.html
In general it argues against your view.
Also 98% of Oz mortgages are variable. See this for series.
http://www.rba.gov.au/Statistics/Bulletin/F05hist.xls
Thank you, nice article. I would like to clarify one aspect though: the SMH article talks about Australian net public debt reaching 13.8% of GDP by 2013/14. This is clearly a very different situation from running a budget deficit of that level.
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