"There are some signs that households are taking on more risk in their investment decisions. It is important that banks do not respond to pressures to boost revenue by imprudently loosening their lending standards, or by making ill-considered moves into new markets or products."
- The Reserve Bank of Australia
During the semi-annual Financial Stability Review, which is reflecting government's assessment of current conditions in the country and potential risks to financial stability, the Reserve Bank of Australia warned lenders to maintain loan standards amid soaring household's investment appetite. In the present record-low interest rate environment domestic banks should not respond to pressures to increase revenue by imprudently loosening their lending standards, the RBA claimed. The Australian central bank has cut its benchmark interest rate by 2.25% in an almost two-year easing cycle, to the all-time low of 2.5% in attempt to offset the drag on the economy from waning mining sector investment and overvalued currency. However, on the other side of the coin these actions have fuelled the property market, with prices in Sydney rocketing 8.3% so far this year. Nonetheless, banking sector is still performing relatively well, according to the report.
In addition to that the prospects for the Oz economy are not looking great, according to the recent data, as unemployment hovers around 5.8%, the highest in almost four years. According to analysts, job places in the non-mining sector have to be created at a much faster pace to fill the gap left by the fall in mining working places. Additionally, retail sales volumes have been subdued in the second quarter, raising concerns that growing in the consumption remains below average.
© Dukascopy Bank SA