Big four need to stash billions - IMF
(27 January 2012 – Australia) The International Monetary Fund (IMF) has warned that Australian banks need to stash away billions of dollars in case the property market collapses.
The Herald Sun reported that Melbourne remains among the world’s most unaffordable cities to buy a house – ahead of London, New York and Los Angeles.
The IMF has also cut gross domestic product growth expectations for the world economy for this year by 0.75 percentage points, to 3.25 percent, as global trade slows because of the European debt crises.
The commodities market that Australia relies on is also tipped to plummet 14 percent for the year as Asian growth slows.
The global economic body argues in a working paper that the big four Australian banks should boost cash reserves due to massive exposure to the residential mortgage market.
The Commonwealth Bank, Westpac, National Australia Bank (NAB) and ANZ hold about 80 percent of the nation's residential mortgage market, leaving them vulnerable in the face of a housing crisis.
'Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital,' the IMF report says.
'It would be useful to consider the merits of higher capital requirements for systemically important domestic banks.'
Meanwhile, economists at ANZ have warned the Gillard Government's Budget cuts will slow economic growth by up to half a percentage point a year for the next four years.
Deep cuts by the federal and state governments would produce 'the weakest period of government investment since 1960,' economists said.
The IMF has also cut gross domestic product growth expectations for the world economy for this year by 0.75 percentage points, to 3.25 percent, as global trade slows because of the European debt crises.
The commodities market that Australia relies on is also tipped to plummet 14 percent for the year as Asian growth slows.
The global economic body argues in a working paper that the big four Australian banks should boost cash reserves due to massive exposure to the residential mortgage market.
The Commonwealth Bank, Westpac, National Australia Bank (NAB) and ANZ hold about 80 percent of the nation's residential mortgage market, leaving them vulnerable in the face of a housing crisis.
'Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital,' the IMF report says.
'It would be useful to consider the merits of higher capital requirements for systemically important domestic banks.'
Meanwhile, economists at ANZ have warned the Gillard Government's Budget cuts will slow economic growth by up to half a percentage point a year for the next four years.
Deep cuts by the federal and state governments would produce 'the weakest period of government investment since 1960,' economists said.
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