another reason the RBA may not lift rates for a long time

I called the conundrum @ 3 years ago... its playing out exactly as predicted.

They will actually protect the AAA rating of they get ahead of the potential delinquency issues...

Its why I have a rate cut as a 30% chance for 2019...against all predictions .

 

Unless economic despair occurs I expect banks to raise rates in 2018 independent of the RBA. 15 to 25 pts. So many indicators show funding cost and margins are at risk. Trump + China are the issues that limit it for now

Banks will face issues with new credit reporting. And reduced construction. And reality in servicing. Their hands are tied but they will squeeze margins and raise rates. They can't lend more.

 

That's the bottom line. A credit crunch means less profits and the only way to claw some profits back is to increase margins on existing loans. The question is how high can the banks go without increasing defaults to an unacceptable level? They don't want to kill the host!

The RBA and APRA have themselves backed into a corner. If the RBA had held at 2.5% back in early 2015 and if APRA had started tightening standards back then, well things would be markedly better now. Yes we would have had a recession but at least we would be past the worst of it by now.

Unfortunately now, there are very few viable options left and the problem is so much bigger.