AUSTRALIAN banks are facing their biggest challenge yet in the face of a global financial crisis that has seen them become the focus of a fierce competition to secure the next wave of foreign investment.
Key points:Banks are losing millions to foreign investors in the global financial market as they struggle to find customersThe Australian government has given them the green light to open up more banks to foreign firmsThe Government says the policy will help Australian banks remain competitive on the world stageBanks across the country are struggling to find enough customers to meet demand as they seek to make up for the shortfall in foreign money they have lost to capital flight.
The banks’ annual report released on Tuesday showed that the annual losses to foreign buyers fell to $9.9 billion last year, from $12.1 billion in 2015.
But in the months since the financial crisis, the sector has been hit by a surge in foreign investment, including from the likes of China, which saw a $2.4 billion capital outflow in the first nine months of the year.
The decline in overseas spending and an oversupply of deposits, combined with the tightening of capital requirements, has meant that the banks are now under pressure to increase the number of branches overseas.
The latest figures from the Reserve Bank show that foreign direct investment has fallen by around a quarter since it peaked in 2012, but this is expected to slow down to around $9 billion by the end of the decade.
The report also said that foreign banks were unable to attract enough customers in Australia because of an increase in competition from foreign firms in the capital markets.
The Reserve Bank has said that it is willing to consider providing more flexibility to foreign banks to open more branches overseas, with the aim of attracting more capital to the country.
But it has yet to say whether the Government will provide the banking sector with the green signal to open branches overseas for foreign firms.
The foreign investors who were buying Australian debt were also likely to have been motivated by the prospect of paying a better rate of interest on their debt than other Australian borrowers.
In an article in the Australian Financial Press on Monday, John Grant, the chief economist at Australian Capital Economics, said the Australian economy was still recovering from the global economic downturn.
“The outlook for Australia’s financial health remains fragile,” he wrote.
“While some economists say the recovery is still fragile, many other analysts believe the economy is strong enough to withstand a global recession.”
If we are to avoid a financial meltdown, we need to do more to stimulate the Australian property market and to stimulate growth in other parts of the economy.
Foreign buyers are still a big part of our economy. “
While foreign investment has been falling, Australia has seen an increase of overseas purchases, which has increased the risk of a financial crisis,” he said.
“Foreign buyers are still a big part of our economy.
The Australian population has grown by a huge margin in the past 20 years and our financial system is resilient.”
Topics:business-economics-and-finance,business-news,housing-industry,bankers,foreign-affairs,bank-of-the-stars-2870,sydney-2000,brisbane-4000,brisbanon-3450,melbourne-3000,perth-6000,syDNS,australiaFirst posted January 06, 2021 17:57:46Contact Nicola DuttonMore stories from New South Wales