Transcript of Question & Answer Session A Stocktake of Securitisation in Australia

We do have some questions and a reminder, if you want to post a question, please use the app.

It’s a slightly longer one here.

If some assets are moving from banks to non-banks, will we get a corresponding decrease in senior unsecured bank issuance?

And if so, does that have any concerns for local market liquidity and benchmarking?

Okay, that’s quite a bit in that question.

So yeah, I mean, I don’t know that I would draw those direct linkages quite so much.

I mean, I think in any financial system there’s a role for both non-banks and banks and they occupy different parts of the market, different risk appetites and that’s by virtue of banks take deposits, whereas non-banks don’t take those deposits.

So I think that’s probably the first point I’d make in terms of whether there’s a shifting between the two that broadly raises any concern.

I think there’s a role for both in any system and they both have a natural place as to how the banks fund themselves.

I mean, they have a variety of funding sources.

How they choose to fund their balance sheets depends on a whole range of factors.

So I don’t know that I would necessarily quite draw a stronger link there to those non-bank markets.

I think really it’s up to the banks and the non-banks to find the optimal way of funding themselves.

Thank you.

We have quite a specific data question here.

One of your charts had 6% of all credit was securitisation, I think is the question, does that count include retained bond issuance of ADIs?

Retained bond issuance in terms of marketed securities, the answer would be yes.

If the question is self securitisations, then the answer would be no.

Thank you.

Very clear.

Got time for another question?

Do you have a view specifically on supply of credit to the SME sector?

Is there sufficient availability?

Yeah, I mean this is, you know, this is a long run challenge I think, and it’s not unique to Australia.

I think it’s been a source of discussion over many years.

We know that SMEs have more difficulty raising finance when you compare with larger firms.

But you know, there’s a whole host of reasons for those.

And you know, some of them do come down to risk assessments and relative risk assessments.

So, you know, it’s, you know, whether that’s the, you know, right level of financing I think is difficult to tell because you do have, you know, lenders having to make economic assessments based on the risks, but it’s been something the bank’s been quite involved in over the years.

Every year we have a panel with small business to understand their access to financing.

Of course, we speak to to the banks about it in liaison.

So it’s definitely an area of interest to us.

I think one thing that Brad Jones, one of my colleagues, talked about earlier in the year, which goes to this at some level, but kind of links it just to the broader outlook for the Australian economy is that as a financial system, we’re really set up to lend against hard assets.

And that’s the things you can stub your toe on or drop on your toe.

There’s much -- and if you look forward to the sorts of opportunities that we might have as an economy and the sorts of innovation that often is driven by small business, that has a large intangible element to it, I think there’s a big question there on are we set up in the right way to be able to lend against those intangible types of investments that in the modern economy are often the source of innovation and productivity?

So Brad spoke quite a bit on that topic and I think it does tie to the SME question.

Thank you.

I think we’ve probably got time for one more question.

We’ve got lots of questions piling in, actually, but we’ll see how we go.

Has the bank of Mum and Dad reduced the responsiveness of interest rates on house prices, i.e. parents assisting their kids?

Rates question for you.

I mean, when we look at the transmission of monetary policy, we’re looking at the effects on the broader macro economy.

We’re not targeting house prices.

And if you look at how transmission of policies evolved over time, and Chris Kent has given a few speeches on this over time, there have been changes in the transmission of policy, but those have been more around, I think the major factor’s really been the prevalence of fixed rate lending that we saw during the pandemic, and so that affected parser, at least through that sort of channel of monetary policy, that’s largely worked its way through.

So I don’t think we would be pointing to any sort of differences as a result of those sorts of factors.

And to make it a little bit topical, we will squeeze one more in.

It’s just popped up.

How are you factoring in effects of Trump into market evolution?

So, yes, this question comes up in just about every forum these days.

Look, it’s too early to really know what the effects are going to be of the new US administration.

It’s early days and there’s going to be a lot of moving pieces.

I think one of those clearly is going to be

What will the new U.S. administration actually choose to do in a policy sense?

We don’t really know that yet.

And at least important, if not more important, is going to be

How do others around the globe respond to those policies?

So there’s a fair bit of uncertainty there and we’ll need to see how that all plays out.

I mean, the movements we’ve seen in markets so far have been pretty orderly and they’re looking at these same things.

For Australia, we’re a small, open economy, so the global trading system is important to us.

We’ve benefited from the liberalisation of trade over many years.

And so if we were to see a reversal of broader international trading, and of course, China is particularly important to us as a small, open economy, that is going to be important to us.

And those sorts of things do transmit through financial markets.

But at the same time, we need to keep that in context because, you know, often, you know, policies such as tariffs that actually results in a redistribution of trade within the global economy, we’ve got a comparative advantage in many goods and services.

We’ve weathered these sorts of changes quite well as an economy over time, and so there’s potential opportunities as an economy to play to our strengths.

So it’s early days.

We’ll watch, as others do, as to how markets are considering this, but really, we just need to wait and see.

And does an economy play to our strengths?

Thank you, David.

We have run out of time, unfortunately, but please, audience, could you thank David for his keynote speech?