2020.10.2710:23:00UTC+00RBA's Bullock Says Recovery To Be Unpredictable And Uneven

Reserve Bank of Australia Assistant Governor Michele Bullock on Tuesday said Australia's economic recovery is likely to be unpredictable and uneven.

She cautioned about rising business insolvencies and problems for some households in servicing their debts amid uncertain recovery.

Despite the devastating effects of Covid-19 pandemic, the financial system both in Australia and overseas has withstood the test, the banker said.

The Australian financial system remains profitable, notwithstanding substantial loan loss provisions. Their strong capital position allows them to continue to lend to support the Australian economy, Bullock noted.

The banker observed that non-performing loans to households, which had already risen over the past couple of years, are expected to continue to rise over the coming months.

She observed that the impact on bank balance sheets of the rise in non-performing loans will depend on whether the value of the property is enough to cover the outstanding debt.

As there is only a very small share of loans is currently in negative equity, losses to banks on housing loans will be limited, Bullock added.