RBA Release Report Into Stability Of Australia’s Financial System

29 March 2012 00:00am - Mark Maffia

RBA Release Report Into Stability Of Australia’s Financial System

The Reserve Bank of Australia released its latest report into the stability of Australia’s financial system. Australia’s central bank said that Australian banks were in relatively good shape although conditions differ across the economy. They also said that the number of business failures and debt defaults is now well above the average. The Bank warned banks against expecting strong profit growth to continue, particularly as credit demand remained weak across the economy.

The RBA said large banks were in a better condition to cope with tight funding conditions. They also said that overall, global financial conditions had improved since the beginning of this year, after the European Central Bank took steps to improve the banking sector’s access to liquidity. Having said this, the RBA warned that Europe would take a long time to fully recover.

The mining boom in Australia, which currently affects around 20% of the economy, is set to be the new challenge for banks. The boom has brought a strong Aussie dollar along. The RBA said, “Conditions continue to vary significantly across the business sector.” They added, “These divergent experiences help explain why banks’ non-performing business loans and business failure rates are somewhat higher than average.” Where there is mining, obviously business conditions are healthy but in industries such as manufacturing, retail, construction and tourism these sectors are facing difficulties.