Economic damage still not widely perceived nor understood by market. Damage to banks yet to fully materialise. Probable structural changes not factored until current market. Government policy responses needs to be overwhelming.
Lloyd C: Where the market damage to banks is coming from? RBA's cheap funding to Australian Banks (at 0.25%) mitigates the expensive (4-5%) offshore funding requirements (30-40% of all funding gap) and when combined with near zero interest paid to local depositors (60-70% of funding source) the banks balance sheets don't seem to be that vulnerable even if B&DDs due to short disruption to the economic activity is accounted for, which is partially mitigated by Government's budgetary measures anyway.
I'll answer for Lloyd about the damage to the banks. I think your statement about a short disruption to economic activity is where the difference of opinion is. If employment rebounds suddenly and small/medium businesses don't go broke then banks will sail through. However, if: * unemployment takes a long time to recover (which is usually the case) * and/or the economy only operates at 80-90% of pre-crisis levels for months (like we are seeing in China) * and/or small/medium businesses go broke en masse * and/or there is a residential housing crash because of the influx of rentals and air bnbs * and/or there is a residential housing crash because of job losses and banks tightening lending criteria * and/or there is a commercial property crash due to retail or office demand and companies having more people working from home then the banks will have a larger bad debt problem