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RBA data on Bank’s & other AFI – (Australian Financial Institutions)

May 19, 2011
Investors Lament: “In market terms – buy the rumour and then … sell the fact …
RBA data on Bank’s & other AFI – (Australian Financial Institutions) …
Yoda – this sites regular little door-stop and ass-bumper – and we love him so – has passed comment on a previous story relating to Global Debt and linked here – and raised the issue of Bank savings in Australia being at all time records. A little research via the Reserve Bank website and other on-line websites – all dared to be done by YODA– has produced the following group of Charts and tables …

M1 and M3 Chart

The chart above provides the M1 and M3 data for the Australian economy since 1990.  ‘M1’ is defined as currency plus bank current deposits of the private non-bank sector. ‘M3’ is defined as M1 plus all other ADI deposits of the private non-ADI sector plus certificates of deposit issued by banks.


The chart clearly shows that Business and Personal lending has faltered and declined since the GFC impacted. Housing – both Investor and Owner occupied never missed a heartbeat. This is a very dangerous comparison – since the GFC house prices have not had the corrections that other Nations have experienced. It will happen here and whilst Banks have been out there pushing the Home loan – Business and personal expenditure have declined – this screams conflict – now is not the time to be buying a home or investing in residential housing.

AFI Off Shore Borrowings

This chart is most telling – the straight line spike in the middle of the GFC when Lehman’s went under – highlights to what degree Australian Banks had to go to the Global wholesale funding window to borrow wholesale funds to cover domestic savings shortfall. These funds remain in the Banks deposit base and are rolled over on a regular basis. With domestic Home lending still the only real asset growth in the Australian Financial sector – apart from Government borrowings and Credit Card expenditure … these wholesale funds are the Australian Banks achilles heel when it comes to interest rate stability in the home loan sector.

There is a big plus for the Banks holding these offshore borrowings in US$ terms – the A$ appreciation has seen a 40% capital gain – meaning that the principal owed has diminished in A$ terms thus bring a massive windfall to the Banks.

Credit Card Balances

The Banks have continued to shove out the Credit Card and Limit increases – since 2007 – Limits have increased from $104 billion to $135 billion – Limit usage has increased from $38 billion to $49 billion. This unused Limit exposure is a contingency Australian Banks and other AFI’s – will have to fund if the Limits are drawn down. This is a risk exposures Banks have never had to consider – but with Banks tightening lending for Business and Personal Loans – more and more households and small business’s are turning to Credit Cards to fund their expenditures. Banks are squeezing higher margins out of it committed borrowers by forcing them into Credit Card borrowings.

Bank Deposits

The Bank Deposit Chart above shows the faltering growth in Australian Bank Savings. To complement this data further – the OECD – Dec 2010 report produces statistical tables on percentages of disposable Income Savings ratios.

The table below – linked on-line here – is a snapshot from the OECD report and shows Australia’s rate of savings as compared with 25 other Nations. Australia is only above the Czech Republic and Denmark on the list. Australia’s savings ratio at 2.2% in 2010 and forecast at 2.5% in 2011 – is off from the 5.1% in 2009 – but above the rate during the period 2005 – 2008 …

The GFC has impacted globally – and Australia has been somewhat insulated from the most severe economic troubles that beset Northern Hemisphere Nations. This is not to say that China and its demand for Australian resources will protect Australia’s economic stability forever.

Managed Funds

The above chart presents the amount of Funds under Management as collected from the RBA website. The GFC has had significant impact and as stated previously – three years of continued contributions and market recovery has not yet returned fund levels to pre GFC levels.

Australia’s property market has survived the GFC fallout and residential property market decline suffered in Europe and Nth AMerica thus far. The table above – linked on-line here – shows the % moves in property values across like Nations – and as can be seen Australia has fared well. Recent rises in domestic levels of interest rates have pressured property market values. Any further upward movement in interest rates will further pressure home ownership affordability to a point that will place more homes in negative asset revaluations and loan arrears. Banks will not revalue these loans if repayments are in order – another real failing in accountability and false reporting by Banks. Increased loan arrears and negative asset revaluations will pressure Banks profitability and shareholder returns … even place their capital positions in pressured positions.

So in answering YODA’s comment:

Submitted on 2011/05/19 at 9:44 am | In reply to EYE-BALL Guru

Firstly the Australian Banking system is probably one of the soundest in the world and its weakness is not against wholesale funding. I can accept an argument over reliance on homelending and the subjectiveness of bubble theories …

Submitted on 2011/05/19 at 11:08 am | In reply to EYE-BALL Guru.

Read it again dummy and you may understand it. Then check the savings ratio in the Australian economy and you will realise what I am saying is true. … [insults removed].

I think the data presented hereto can not be disputed – Savings in this Nation is not at record levels as YODA claims … – in fact it has diminished since the worst of the GFC crisis – bad spending habits have returned and the Credit Card graph above indicated that this is where funds are being borrowed.



  1. yoda
    May 19, 2011 at 6:02 pm

    At DJs, Mr Zahra said sales in April were “broadly flat” when compared to the same month a year earlier, and had remained flat in the opening weeks of the fourth quarter, with the arrival of cold winter weather helping to lift seasonal fashion sales.

    “We haven’t seen enough to be confident that people have returned to their previous shopping behaviour, but at some point it will break because savings ratios are at an all-time high and people will get bored with that,” he said.

  2. EYE-BALL Guru
    May 19, 2011 at 6:10 pm

    You wus … you want to quote a DJ’s executive without foundation …

    Respect the GURU boyo … did the research data intimidate you?

    Comeon – give us a comment on how you feel about Australian Savings Bank Savings now that you have real data – as opposed to comments from someone talking their book … was that not what you said GURU was doing … talking their book …

  3. yoda
    May 19, 2011 at 6:48 pm

    See the enclosed speech Reserve Bank of Australia…. http://www.rba.gov.au/speeches/2011/sp-ag-170211.html note particularily the increase in household savings ratios….10%

    Some Current Issues in the Australian Economy
    Philip Lowe
    Assistant Governor (Economic)

    Address to the Committee for Economic Development of Australia (CEDA)
    NSW Economic and Political Overview 2011
    Sydney – 17 February 2011

    Consumer Restraint

    The second issue that I would like to talk about is the restraint in consumer spending and borrowing.

    As many retailers will attest, consumer spending has been subdued in recent times. You can clearly see this in the household saving ratio (Graph 8). While there are a whole host of measurement qualifications, the current data show that the saving ratio has increased from a little below zero in the first half of the 2000s to around 10 per cent in 2010. This increase has reversed the steady decline that took place over the previous two decades.

    Graph 8

    With the benefit of hindsight, a change in the trend looks to have started in the middle of 2000s, although, at the time, this was difficult to detect. Over the decade to 2005, there was a large run-up in household debt and asset prices, and a decline in saving, as households adjusted to lower nominal interest rates and innovation in the financial system. It is plausible that this adjustment was largely completed by the mid 2000s and that since then, household spending patterns have returned to more traditional norms. Over the past few years, this change has been reinforced by the global financial crisis which has led some households to rethink their spending and borrowing decisions, partly in response to greater uncertainty about future asset returns.

    A slightly different way of seeing this change is to look at how much of the increase in household incomes each year is actually spent. In quite a few of the years during the decade and a half to 2005, household consumption increased by more than one dollar for every extra dollar of household disposable income received (Graph 9). In contrast, since 2005, only around 65 cents in every extra dollar of income has been spent. It now seems reasonably clear that after a long period of structural adjustment many households are putting a little more aside each month than they were for most of the 1990s and the early 2000s.


  4. EYE-BALL Guru
    May 19, 2011 at 7:23 pm

    This information is being further investigated – it appears that the RBA data as contained in their on-line database of spreadsheets – conflicts with the data presented in this chart that was part of a speech given by:

    Philip Lowe
    Assistant Governor (Economic)

    Address to the Committee for Economic Development of Australia (CEDA)
    NSW Economic and Political Overview 2011
    Sydney – 17 February 2011 RBA Deputy Governoner


    The chart also conflicts with the OECD report and clarification from the RBA is curently being sort …

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