Australia’s banks can withstand end of cheap money
The Commonwealth Bank’s stellar results suggest the overall strength of the banking system will enable it to weather the interest rate correction without a crash landing.
The Commonwealth Bank of Australia’s 11 per cent jump in profit and higher dividend for shareholders provides further reassurance that Australia’s banks are starting from a strong financial position as the ultra-cheap money era closes.
The “unquestionably strong” capital buffers the banks were required to build, as recommended by David Murray’s 2014 financial services inquiry, helped to shore up the nation’s financial system stability during the pandemic storm. The stress test now is the adjustment to the normalisation of credit costs and credit growth as the Reserve Bank of Australia raises the cash rate to tame the spike in consumer price inflation.
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