Lots of good content here from Guy. A few highlights that touch on points I have argued myself here and in other public forums:
1/ Superannuation funds have resulted in a shift of deposit-based funding out of the banking system: "At the same time, on the supply side, the importance of superannuation in Australia has, for much of the past few decades, constrained the growth in household deposits."
2/ Credit growth has decelerated in Australia in part because the once-off, "level effect" associated with the surging debt-to-income ratios in the 1980s/90s caused by the structural downward shift in average nominal mortgage rates from 12.6% between 1980 and 1995, and circa 7.4% since, has ceased. (I have presented on this too many times to count.): "As has been discussed in much recent RBA commentary, for households the slowing in demand for credit appears to be driven by a more cautious approach to debt. There are a number of factors contributing to this. One is that the increase in household leverage that occurred through the 1990s and first half of the 2000s in response to the downward shift in the nominal structure of interest rates has run its natural course."
3/ Lenders will face a challenge insofar as credit growth is likely to remain at single-digit levels for a long time (rather than the double digit rates previously), which is related to the point above: "So banks have experienced a slowdown in asset growth and have funded the assets with a greater share of deposits...There are reasonable grounds to expect these trends may be sustained for some period to come...growth in the economy in the period ahead may be associated with less growth in business credit than has been the case in the past. It is also likely to boost deposit growth. So banks may be seeing a prolonged period of faster deposit growth but slower asset growth."
4/ The RBA's historical liquidity facilities were a subsidy to the ADI system (in Debelle's words "a flat rate of zero" was charged for accessing them), while the new liquidity facilities required to enable Australian banks to satisfy BASEL III will have a positive fee associated with them: "One can think of the current situation as an arrangement where a flat rate of zero is charged. Banks currently hold a range of assets to satisfy their liquidity requirements, with each asset having different credit, maturity and market liquidity characteristics. Our view of how much we are willing to lend against each asset under repo are based on these characteristics, and will continue to be so. In the future, we are moving to a world where there will be a formalised liquidity facility where a flat, positive fee is charged."
