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* Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages. This is completely untrue. The extent of sub-prime mortgages isn't the s
by brc 15y ago
* Australian banks are more heavily regulated and haven't lent 'sub-prime' mortgages.
This is completely untrue. The extent of sub-prime mortgages isn't the same, but it exists nonetheless. As does the existence of RBMS, which the government continues to purchase from the banks.
All of that looks over the fact that the big 4 banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property. In some ways it's worse than the USA because the mortgages are still on the books rather than being sold off into the secondary market.
The differences between the Irish housing bubble and the Australian housing bubble are actually much less. So you're right to say that there the parallells between the USA and Australia are less, but the parallells between Ireland and Australia are few. Ireland has full-recourse mortgages like Australia. Ireland had a massive overinvestment in property, like Australia. Ireland had high immigration, like Australia.
As I've said elsewhere in this thread, I don't think there is ever a time when you take your eyes off the negative.
- thmcmahon 15y agoI agree that Australia shouldn't become complacent, and I agree that housing is historically highly priced in Australia, I just don't agree that we are looking at a catastrophic bubble. Ireland and Australias' levels of net migration aren't comparable either. See: http://www.wolframalpha.com/input/?i=ireland+net+migration%2C+australia+net+migration http://www.wolframalpha.com/input/?i=ireland+net+migration%2...
- Nick_C 15y ago> banks in Australia are massively overexposed to residential mortgages and small business loans underpinned by residential property As opposed to what, though? Historically housing and small business loans were the raison d'etre for being a bank. It is only the last few decades where they have been allowed to invest in other areas. I think you are overplaying the exposure to housing. Our tier capital requirements were and are much more onerous than in the U.S. We (our central bank and treasury) have been telling the U.S. for two decades that their banking system was broken, and we were proven right. You can't compare a U.S. bank to an Australian one, they are very different beasts.