Australia’s financial stability is sound as its banks remain well capitalized, allowing the central bank to stick with policy tightening, according to Alex Joiner, chief economist at one of the nation’s biggest asset managers.
(Bloomberg) — Australia’s financial stability is sound as its banks remain well capitalized, allowing the central bank to stick with policy tightening, according to Alex Joiner, chief economist at one of the nation’s biggest asset managers.
“I don’t think the problems that we’re seeing overseas will emerge in the Australian banking sector by any stretch,” Joiner at IFM Investors Pty Ltd. said Friday. “So in that environment the Reserve Bank’s likely” to keep increasing interest rates.
“Only if these banking issues became far more systemic, impacting global growth, do I think that the RBA will need to act by either pausing or reducing policy,” he added.
Joiner’s call for an April rate hike to 3.85% comes as financial turmoil swirls from the US to Europe following the collapse of Silicon Valley Bank. That prompted investors to start repricing rate expectations, with money markets now showing the RBA’s current 3.6% rate as the peak of its tightening cycle, having earlier seen a terminal rate of 4.1%.
Westpac Banking Corp.’s Bill Evans also lowered his terminal rate forecast earlier Friday to 3.85%, from 4.1% previously, predicting a pause next month.
“To my mind, the Reserve Bank will be focused squarely on the challenges it has domestically rather than those that are emerging globally,” said Joiner at IFM, which has A$211 billion ($141 billion) of assets under management.
ANZ Bank echoed those views, reiterating its call for the RBA to stay the course with quarter-point hikes in April and May to take the cash rate to 4.1%.
The RBA meets on April 4.
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