Commonwealth Bank of Australia’s Chief Financial Officer David Craig's message to anyone worrying about a potential property-market implosion is: Don’t worry.
Mr Craig said his bank’s home borrowers were well placed to weather rising interest rates, highlighting the country’s strong employment levels as a key support for home borrowers and thus the wider property market.
His comments were supported by NAB's Chief Financial Officer Craig Drummond.
The two banks are well placed to comment on Australian property market trends as together they control some 40 per cent of the nation’s A$1.49 trillion mortgage market. Both lenders raised home-loan rates last month to meet higher capital requirements for their mortgage books, adding to the concern among some economists that the country’s home prices are due for a tumble over the next two years due to the higher borrowing costs and increased supply.
Mr Craig said it would take a rise in unemployment rates to over 10 per cent to cause real difficulties for Australian mortgage holders.
“It’s inevitable that house prices will start to flatten or even come down a little bit, but we think it’ll take a lot to actually cause any hardship,” he told the Bloomberg Summit in Sydney.
“We always think in terms of double-digit unemployment - 10 per cent unemployment and things start to get a little bit difficult.”
Australia’s jobless rate remains well below that figure, dropping to 5.9 per cent in October from 6.2 per cent the previous month. While China’s economic slowdown has hurt Australia’s mining industry, record-low interest rates and a 32 per cent slump in the nation’s currency since the start of 2013 has helped exporters and firms in tourism, health care and education.