Westpac result shows Aussie property still strong

As a former banking analyst, one of the first things I do when banks report their earnings is skip through the presentation and go straight to the loan details. I want to see if people are paying their loans, deferring or falling behind. Banks are highly leveraged, and earnings mean nothing if the loan book is going bad.

The good news for Westpac is the residential mortgage business is holding up very well. This echos CBA and NAB who have recently reported their numbers. Loan arrears are tracking in line with trend and long term averages. The only issue for Westpac is auto loans - of which around 3% are in arrears. That’s about twice the rate as two years ago.

That to me says that Aussie borrowers are continuing to pay down their home loans, over and above everything else. Car loans and retail spending are being sacrificed in order to pay off the house. Every rate hike means spending cut everywhere else except on the house.

In the video, I also go through the latest wage inflation data (which is good news for inflation) and the disappearance of inflation in Canada, which will eventually echo down under

Peter Esho is an economist and Founder of Esho Capital. He has 20 years of experience in investments and markets.