Credit crunch won’t stop Australia’s growth: RBA

Profitable banks and a relatively small low-doc loan market put Australia in a strong position to ride out the credit crisis that has seized international financial markets, according to a new Reserve Bank of Australia report released today.

The positive tone of the report is likely to provide a further boost to Australian markets already riding high after last week’s 0.5 point interest rate cut in the US.

While acknowledging that the credit crunch brought about by the sub-prime melt-down in the US had triggered nervousness in the market and dented investor confidence, today’s Financial Stability Review says the repricing of risk that has taken place around the world “is to be welcomed” and will increase the length of the current period of global economic growth.

There is also good news for the Australian economy more generally, according to the report, with a steady pace of growth, strong business and household balance sheets and relatively low debt-servicing ratios and arrears rates.

Even prospects for slower growth in the US do not appear to be weighing heavily on the minds of the RBA technocrats, with the outlook for world economy the likely to remain positive despite uncertainty in financial markets.

But the RBA’s positive outlook is not reflected in new data showing a big increase in home repossessions in Queensland over the last three years.

Data from the Queensland courts collected by Labor shows that 756 homes have been repossessed in 2007, a figure that is already almost double the 484 repossessions that took place in 2004.

Queensland home repossessions grew to 869 in 2005, 910 in 2006 and are likely to top 1000 this year, Labor’s Shadow Treasurer Wayne Swan says.

On the markets, the release of the RBA’s Financial Stability Review this morning added a brief spike to the morning’s positive trading, to push the S&P/ASX 200 up 1% to 6421.4 by 12.20pm.

The Australian dollar is also continuing its recent strong form, trading at US86.82c at 12.20pm after the most recent Sydney close of US86.62c.