Australian Banks Complain Of Too Much Money

Australia's banking system has more money than it can use, a challenge that will likely grow n with the central bank widely expected to trim interest rates to near zero and boost the amount of bonds it buys. Further measures to spur credit demand are on the cards, including scrapping "responsible lending" laws, and on Tuesday the Reserve Bank of Australia is expected to cut its cash rate to just 0.1% and increase its bond buying. But bankers say they don't need all that money. Australia's household debt-to-income ratio is at a record high of near 200% compared with a median level of less than 150% for 22 advanced economies, one reason borrowers are reluctant to borrow more. "Money is essentially free today. Making it freer doesn't really change anything. There's all this liquidity flushing around and I don't have much productive use for it, because people don't want it," said Australia and New Zealand Banking Group Ltd CEO Shayne Elliott after announcing a 40% slump in profits. At the height of the pandemic, credit growth in Australia contracted as workers and businesses hoarded cash and banks became more risk-averse. Repayments on almost one in every 10 dollars in their loan books were frozen under forbearance programs. Housing credit has since recovered, with latest data showing 3.3% annual growth in September, higher than 3.1% in January. But the overall outlook is still dour, with business failures expected to rise and unemployment likely to remain elevated for a long time to come.