MNI BRIEF: RBA's Kent Says Aussie Banks Unquestionably Strong

Australian banks remained "unquestionably strong" and domestic financial markets continued to function well despite the global banking turmoil, said Reserve Bank of Australia Assistant Governor (Financial Markets) Chris Kent at a conference on Monday.

"Volatility in Australian financial markets has picked up but markets are still functioning and, most importantly, Australian banks are unquestionably strong – the banks’ capital and liquidity positions are well above APRA’s regulatory requirements," he said, referring to the Australian Prudential Regulation Authority.

The impact from the RBA's 350bps of tightening will be "elongated" due to the large share of fixed rate mortgages and increased savings buffers held by many Australian borrowers.

He said only about 45 per cent of the rise in the cash rate had passed through to total scheduled mortgage payments at the end of 2022, though slightly more would have passed through in early 2023.

"The lagged effect of the cash flow channel of monetary policy is likely to be somewhat elongated currently due to the high proportion of fixed-rate loans and sizeable buffers held by many borrowers. This means that it’s likely to take longer than usual to see the full effect of higher interest rates on household cash flows and household spending," he said.