I fairly confident on a down turn in China and indirect consequence to Australia. As this is currently Australia's biggest trade partner. Also other global areas such as Europe/Italian banks, US record high DJIA, etc.
The DJIA has been shaken by the information coming out about China this week, so if this was a tremor i'm still waiting for the earthquakes and after tremors to follow which will be good with a falling AUD/USD and rising gold price.
The red flags with Australia's personal debt and proportion of debt is been flagged everywhere....the economist, wall street journal, Moody's, Stand/Poors, RBA etc.
If you choose to be ignorant to the facts so be it.
Its your choice.
Chinese banks a bigger risk to Australia than domestic ones: RBA
The Reserve Bank is more relaxed about Australian household finances than it was six months ago, but more worried about the threat of a Chinese debt crisis.
The RBA cited slowing home price growth and better lending standards as key factors allowing it to cut the official interest rate further in August, to a fresh record low of 1.5 per cent.
At the time, the bank cast doubt on CoreLogic figures showing a renewed tick-up in Sydney and Melbourne home prices, but it now appears to have accepted that these markets have accelerated.
"Housing price growth is also slower than it was a year ago, although it has picked up a little in Sydney and Melbourne in recent months," the RBA noted in its half-yearly Financial Stability Review.
However, overall, the Reserve Bank believes financial risks in the household sector have lessened since its last review six months ago.
"The share of new high loan-to-valuation ratio (LVR) lending and interest-only loans has fallen; high LVR lending is now at its lowest share in almost a decade," it noted.
Although it is not a completely trouble-free picture.
"Nonetheless, the household debt-to-income ratio is still drifting higher, even after adjusting for the rapid growth of balances in offset accounts," the RBA added.
Furthermore, the RBA acknowledged that, although home loan borrowers are on average two-and-a-half years ahead of scheduled repayments, "these aggregate figures mask significant differences across individual borrowers."
Another area of concern remains the apartment market, particularly in inner-city Melbourne and Brisbane, where the threat of a supply glut looms large.
The Reserve Bank has attempted some modelling on possible losses in the event an oversupply leads to large price falls, rising mortgage defaults and the collapse of some developers.
With a default rate between 5-15 per cent, it would take at least a 45 per cent price slump for inner-city apartments to trigger more than a billion dollars in losses for the banking system arising from those areas.
In its extreme scenario, the RBA sees around $2 billion of additional losses coming from loans to developers, however losses under half a billion dollars are more likely based on the experience of commercial property markets during the global financial crisis.
The RBA added that, in recent months, APRA has commenced a review of commercial property lending standards, including residential developments, with an aim of improving them.
Chinese financial system a bigger concern
While the Reserve Bank is keeping a close eye on the well-publicised threat of an Australian apartment glut and defaults, it appears far more concerned about a Chinese banking crisis.
It noted that small and medium-sized banks have been growing fastest, rising from a market share around 40 per cent in 2009 to about half the banking system in 2015.
This is a particular concern to the Reserve Bank because it is worried that these smaller institutions are less closely monitored, have smaller buffers to protect themselves against loan losses, rely more on short-term funding that may be difficult to roll-over in the event of a crisis and have also been more heavily engaged in riskier 'shadow banking' activities.
The RBA is also worried that any policy moves to prevent a crisis in the short term could lead to a bigger one in the long term.
"The Chinese authorities also retain many levers to support near-term growth and financial stability, but using many of them would likely entail a further increase in debt that could increase the risks to longer-term reform and stability," it cautioned.
The Reserve Bank said a Chinese financial crisis would negatively affect Australia through falling trade volumes and commodity prices.
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