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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

Ratings movements by ratings Agency Standard & Poors (S&P) has been the focus for the last week. On Monday morning, S&P lowered the credit ratings on 23 local institutions that had been on negative outlook noting that “economic imbalances in Australia have increased due to strong growth in private sector debt and residential property prices in the past four years, notwithstanding some signs of moderation in recent weeks”. S&P said that financial institutions operating in Australia now face an increased risk of a sharp correction in property prices.

This increased "Economic Risk" assessment of Australia caused a credit rating downgrade of almost all (23 in total) Australian financial institutions. Ironically, the four major banks who have the greatest exposure to the housing market and property prices were spared by S&P due to the expected government support given to those banks that are “too big to fail”.

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Source: Rural Bank

 

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