-Dr. John Laker APRA Chairman
Following the disappointing budget release earlier this month, Australian watchdog released a warning note for all mortgage lenders and for the economy in general. Investment in the key mining sector is waning and the economy will not be able to receive another boost from it. Moreover, OZ Minerals, the nation's third-biggest copper producer warned that they can halt work on the $2.8 billion project, if they are not able to attract a development partner. It is another worrying sign for Tony Abbott, who is looking for another sector to support growth. Earlier, analysts were expressing their view that housing market can replace the mining sector.
The latest report from the Australian Prudential Regulation Authority (APRA), however, diminished these hopes. A fresh report showed that there are significant risks to the stability of the financial system of fast-expanding residential mortgage lending at time when domestic banks are fiercely competing for clients. The warning comes amid the fact the house price inflation reached 10% in the nation's most populated cities, and at time when record-low interest rates are driving the domestic demand for property. Keeping in mind the fact residential mortgage constitute the largest part of the credit exposure, risks can be even higher. Therefore, the company advices to review risk management procedure around the housing credit, in order to minimize risks.
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