Well, he actually back-tracked from using the word "kills", and understandably so! I made this same point in a long feature for Property Observer and Business Spectator this week. Here is what Dr Debelle said in the Q+A following his speech this week:
Question: "the assets of the Australian banks are all in houses, and they're all in – vulnerabilities are around housing, however you want to couch that. And as that continues to grow, how is that 5 going to effect..."
Dr Debelle: "Well, I could easily just say 40 per cent of their assets are in business loans, and there are concerns about business loans. I mean, assets, you know, are not – the fact that the mixed 60 per cent housing, 40 per cent business, I 10 don't think is anything to be of particular concern about. As I said, you want to be just confident in the value of assets across the whole book rather than focusing on particular bits. It's also not clear to me that there is any particular problem in the asset quality on the housing book at the moment. If you look at, over the last three years, most of the banks' provisioning and bad debt exposure has been on the 15 corporate side of the book, particularly the commercial property side of the book, not on the residential side of the book. And, indeed, by and large, if you go back through financial crises through history, mostly what brings banks undone is commercial property exposure. That tends to be 20 the thing that kills – well, not – I don't want to use "kills" – makes it difficult for banks. Anyone else? Yes, sorry. Yes."
