Reserve Bank of Australia (RBA) Assistant Governor Guy Debelle also said competition in the mortgage market would remain stiff enough to stop banks from widening their margins on loans, even though many non-bank lenders had left the business. Speaking at a financial services forum, Debelle said the decline in credit outstanding to businesses this year had been due to both demand and supply factors.
Many businesses had chosen to raise equity and run down debt, so that the gearing level of the Australian corporate sector had declined from 85% at the beginning of this year to 65%.
"Taking into account both equity and corporate debt raisings, overall business funding has actually grown, albeit at a slower pace," said Debelle.
"This stands in marked contrast to the early '90s episode where total business funding declined for a number of years through the recession."
There had been some tightening in the supply of credit, notably to the commercial property sector. But this was in part due to banks preparing for a much worse economic outcome than had actually eventuated.
"More generally, we do not see much evidence of a wholesale withdrawal of credit provision by any particular sector of the banking industry," he said.
"As confidence returns, one would expect to see business credit growth pick up again."
Debelle also noted there had been no material restriction in the supply of housing credit throughout the global financial turmoil.
"Growth has slowed, but to an annual rate of 8%, which in some countries is regarded as high," he said.
A rise in the banks' cost of funding had compressed margins on home loans, though this had been offset by widening margins on business and personal loans.
Debelle said there good reason to think that bank margins on home loans would be restrained going forward, even though many non-bank lenders having been forced out by a lack of funding.
"The housing loan market remains contestable, even if there are not as many competitors currently," he said.
"By that I mean that any excessive widening in margins will attract new competitors back into the market. The return of securitisation, even if not to its former state, will clearly assist this."
In a speech on Wednesday, Debelle had said there were signs of life returning to the market for Australian residential mortgage backed securities, which had been badly curtailed by the global credit squeeze. -- Reuters
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