The RBA is now joining the retail banks to deliver words of comfort to all. From the AFR today:
" Mr Kent said that Australian banks do not appear particularly vulnerable to higher US interest rates. He said that they can pursue other options and are not forced to obtain US dollar funding at any price."
Well yes and no. Banks don't have to borrow from the US or in USDs. Banks can borrow from anyone willing to lend it to them. One problem with Mr Kent's analysis is that global interest rates are on the rise. Another problem is that foreign lenders know all about our household debt bomb and may seek a risk premium for it. On the other side of the fence we may see increased savings and debt pay downs by households which represents cheap money for banks on the one hand but kills the consumer economy on the other.
EU and emerging market bank risks don't cross the minds of "normal" people, most of whom have also switched off Trump's crazy antics by now. The RBA is fully across the likely impact of global events on our local markets but isn't saying too much about these risks …. for now.
cheers
