Australia Banks: Federal Budget Shines Light on Bank Earnings Slowdown

The Australian Federal Budget's housing tax reforms are expected to reduce investor mortgage growth from 9.2% to 5.5%, leading to a broader slowdown in bank sector credit growth to 5.0%. Macquarie (MQG) and Commonwealth Bank (CBA) face the highest impact, contributing to a sector-wide valuation re-rating.

Key Takeaways

• 1.The Australian Federal Budget's housing tax reform, specifically the loss of negative gearing, is expected to sharply slow investor mortgage credit growth from 9.2% to 5.5%.
• 2.Total bank sector mortgage credit growth is projected to decelerate from 7.2% to 5.0% over the next 12-18 months due to tax reforms and higher borrowing costs.
• 3.MQG and CBA are identified as the banks most exposed to this slowdown due to their high historical reliance on investor lending growth.

Table of Contents

• Housing Sector Tax Reform
• Tax reform may have triggered the Market’s realisation of slower sector revenue growth
• Disclosure Appendix

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