OPINION: A shift in the potential for conflict and fall out from rapidly increasing interest rates could leave many exposed.
unchanged. That is, after the RBA implements its first 1 percentage point of rate increases, which it has done, national home values will fall 15-25 per cent. Most banks have embraced this projection.than 100 basis points. Replicating and enhancing the RBA’s sophisticated “Saunders-Tulip” model of the housing market, we have previously shown that if the central bank lifts to a very high 4.
The inflection point for APRA’s shift was the 2014 Financial System Inquiry, the terms of reference of which I helped draft alongside the likes of David Murray. The central recommendation of that inquiry was a massive deleveraging of bank balance sheets, which APRA has achieved despite intense lobbying from the shareholder-led banking sector.
One terrible idea that some folks have recently canvassed is the notion that the political class should unilaterally change APRA’s capital settings to financially encourage our bulletproof banks to make much riskier, long-term loans to companies. The solution to funding corporate Australia lies in the hands of our gargantuan, multitrillion-dollar super fund sector, which has historically been massively underweight fixed-income and corporate lending exposures in favour of chasing much higher returns in the casino-like equity market.
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