Pendal Group

Crispin Murray writes: It is difficult to predict if today’s signals translate into a credit cycle downturn or not. Either way, current spreads may have an eventual impact on the Australian economy in the form of tighter credit standards and less lending. Should the credit market remain under stress long enough, there is a risk that concerns become self-fulfilling. However, it is important to note that there is a big difference between having to pay more for funding and not being able to access funding at all. The latter was at the heart of the GFC. Today, greater capitalisation, better liquidity and more precise matching of funding means that Australian banks are having to pay a bit more for funding, but the funding is still there. What it does highlight is that growth is likely to remain subdued and interest rates low for an extended period of time. (VIEW LINK)


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