This comment was made at Macrobusiness (link may be locked – but there is a free trial available)
Good to see that deposit growth is holding up despite the RBA very working hard to convince the average Australian that they should be off chasing their fortunes in the stock market or borrowing cheap money from the banks to keep houses prices stable.
The banks may be able to fund some credit growth using domestic savings but all of it?
What about the 30-40% of old credit growth that was funded off shore and needs to be rolled over?
Seems that relying on the savings habits of foreigners will remain the policy of choice. Nothing wrong with the savings habits of foreigners – in moderation.
It seems clear that generating sufficient capital internally (without the compulsion of the super system) to fund our investment/speculation choices is still in the too hard basket.
… and this
“…At these levels I think it’s viable. But any movement to higher credit growth on recovery and it’s straight back offshore for more money as deposits flow out to stocks, property etc. We’ll have more tomorrow on this very topic…..”
Excellent – look forward to it.
That is one of the key issues – how much are we willing to pay for independence from foreign savings and debt markets.
Or to put it another way how much ‘independence’ can our asset prices tolerate.
The problem with a slow melt is that people tend to panic at the first sign of perspiration and the necessary adjustment takes decades instead of years/months.
… and this