Australia businesses financially sound despite challenges -RBA
SYDNEY, Aug 8 (Reuters) - The financial health of
Australia's business sector is generally sound and, while there
are some challenges in the hard-pressed retail sector, they do
not pose a risk to the banking system, a top central banker said
Reserve Bank of Australia (RBA) Assistant Governor Michele
Bullock said intense competition in retailing had left some
firms vulnerable, particularly those that were privately held.
There were also strains in the commercial retail property
market, with possible overbuilding of shopping centres, while
banks had sharply increased lending to the sector in recent
Still, banks' total exposure to retailing was under A$60
billion ($40.57 billion), or less than 3% of their assets.
"So, while there may be vulnerabilities in the retail
sector, these do not currently seem to pose a significant risk
to the financial sector," Bullock said in a speech to the
Toowoomba Chamber of Commerce in Queensland.
In contrast, Australia's huge mining sector was enjoying its
greatest level of profitability in a decade thanks to high
prices for some key commodities, with liquidity high and debt
"As a result, mining firms' balance sheets appear
well-placed to absorb shocks, perhaps more than has been the
case for some time," said Bullock, who heads the RBA's financial
Small businesses, however, had been facing tighter credit
conditions over the past year or so, with bank lending to the
sector hardly growing.
Such businesses account for 70% of employment and 40% of
production in the private nonfinancial sector.
Still, nonperforming loans in the sector remained at low
levels and total lending accounted for a small share of banks'
assets, limiting the risks to the financial system.
"In general, the financial health of businesses looks
sound," Bullock concluded. "And while some individual sectors
and regions do face challenges, these do not currently pose a
threat to financial stability."
($1 = 1.4791 Australian dollars)
(Reporting by Wayne Cole in Sydney
Editing by Matthew Lewis)
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