1 Executive Summary

I’ve taken data predominately from the RBA, APRA, the ABS along with publications to contextualise and analyse the prudential frameworks and credit market for home buyers in Australia. I set out the most relevant policy considerations as I interpret them for the Credit Analyst role. Free to access data tends to be highly aggregated, so limitations apply particularly considering earnings. While there are some earnings by industry group their is not, from what I can see, regular up to date earnings distributions from which to stress test. I’ve put a sensitivity analysis for rates considering the prudential framework in its place. I did not touch on housing, for similar reasons. While I can get access to housing data it is not public access, I would need to heavily redact it for privacy concerns so I considered a broad median instead.

In the Market Mechanics section I have looked at non-performing loans and arrears, where possible by loan to value ratio. Regarding Authorised Deposit-Taking Institution (ADI) level data I focused on owner-occupied loans, also taking a view on liquidity from the data available from APRA.

Role: Credit Analyst - Macquarie

Brief: Prudential Frameworks, Rate Sensitivity & Market Mechanics of ADIs in Australia

Foreword: The prudential framework and stimulus policies are evident across the data. While more granular series for arrears, asset quality and earnings would have added value to the analysis, I can still conclude that Macquaries balance sheet has grown and strengthened through the pandemic era to new highs. I don’t consider market valuation, bar a nod to price to book valuations as a sense check, Macquarie has moved towards the “Big Four” banks with broad increases in liquid assets and growing as a credit provider to owner-occupiers. - While the gap remains significant. Single mortgage applicants will struggle in the current conditions, this is the norm across the developed world with house prices continuing to increase. With the notable exception of China and New Zealand, for two different reasons, both beyond the brief.

I introduced a Housing-to-Liquid-Assets (HALA) ratio to frame balance sheet resilience and statistical models where appropriate.

I am under no illusion that the job I am applying for is on a more micro-level.