Australia's central bank on Thursday cautioned borrowers against taking on excessive debt when interest rates start to fall and risking a boom/bust cycle, though it judged the financial system remained resilient overall, Reuters reported. In its semi-annual Financial Stability Review, the Reserve Bank of Australia (RBA) again highlighted the resilience of households, businesses and banks in the face of decade-high interest rates and painful inflation.
Australia
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While the ATO and major banks are still major drivers of insolvencies, insolvency firms are beginning to see more closures triggered by cash flow issues, the Accounting Times (Australia) reported. The latest credit risk data from Alares suggests that the rate of insolvencies had eased slightly in August despite insolvency numbers remaining 33 per cent above average. In its insights report, Alares said that this could suggest that the “insolvency catch-up” could finally begin to slow down. Alares said the ATO remains the dominant driver of the insolvency catch-up.
Australia’s headline inflation rate fell to within the Reserve Bank of Australia’s target band for the first time since 2021 in August, but economists warn that this won’t trigger an immediate interest-rate cut, the Wall Street Journal reported. Consumer prices rose 2.7% in the year to August, down from 3.5% on year in July, the Australian Bureau of Statistics said Wednesday. The result was in line with market expectations.
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Australia’s central bank kept interest rates steady on Tuesday, deepening a split with global counterparts including the Federal Reserve that are loosening policy as they grow increasingly confident that inflation is under control, the Wall Street Journal reported. The Reserve Bank of Australia’s decision to hold the official cash rate at 4.35%, which was widely expected by economists, reveals the stark choice facing policymakers who continue to worry about price pressures that are lessening elsewhere in the world.
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Australia’s latest attempts to solve its housing crisis are stuck in political gridlock as the amount of available rental space in the nation hovers near a record low, Bloomberg News reported. A key piece of the center-left Labor government’s housing program is in limbo after opposition parties on Wednesday voted to defer for two months legislation that aims to help first home owners break into the market. The bill is for a shared equity scheme which would allow citizens to buy houses with a smaller deposit.
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Pub baron Jon Adgemis’ embattled Public Hospitality Group has taken another hit with receivers and external managers appointed at five of his Sydney hotels, including Oxford House and The Strand Hotel, the Sydney Morning Herald reported. Insolvency specialist FTI Consulting has stepped in as receivers and managers to operate Public’s hip Redfern pub The Norfolk, Oxford House in Paddington and Darlinghurst’s The Strand Hotel, as well as Alexandria’s Camelia Grove Hotel and The Exchange Hotel, also in Darlinghurst. The pubs will be sold as soon as possible.
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The Reserve Bank of Australia said it continues to anticipate the unemployment rate to rise only gradually over the coming months and for conditions in the job market to remain relatively tight, the Wall Street Journal reported. “Conditions in the labor market have eased since late 2022, but our assessment is that the labor market is still tight relative to full employment,” Sarah Hunter, RBA’s chief economist and Assistant Gov., told a financial markets conference Wednesday.
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Australia’s banking regulator has proposed lenders scrap the use of AT1 bonds in capital requirements, potentially becoming the first jurisdiction to phase out the securities that were wiped out after Credit Suisse’s collapse last year, Bloomberg News reported. Replacing additional tier 1 bonds with existing, more reliable securities would simplify and improve the effectiveness of bank capital in a crisis, the Australian Prudential Regulation Authority said in a statement on Tuesday.
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