Australian banks have benefited from structurally declining interest rates, a record-breaking run of uninterrupted economic growth and a booming housing market. Evidence is increasing, however, that this golden run is over with the sector facing some serious challenges over the next 12 months. For the past 35 years, banks - and other interest rate sensitive sectors of the economy - benefited from a structural decline in interest rates. At its peak, the yield on the Aussie 10 year bond reached 16% in 1982, driven by the second OPEC oil crisis and rampant inflation. After central banks regained control of inflation, interest rates slowly began to decline. This trend decline, coupled with key financial market deregulation and low and stable inflation, spurred a structural leveraging-up of the Australian economy.