Australian Housing Dynamics and Affordability
AUSTRALIAN HOME LOANS
STRESS TESTING THE AUSTRALIAN MORTGAGE PORTFOLIO
Assumptions
Base¹
Year 1
Year 2
Year 3
Unemployment
5.1%
5.5%
9.8%
10.5%
rate
Cash Rate
1.5%
0.25%
0%
0%
Real GDP year
ended growth
1.9%
0%
-4.7%
-0.6%
•
•
•
•
ANZ conducts regular stress tests of its loan portfolios to meet risk management
objectives and satisfy regulatory requirements.
Stress tests are highly assumption-driven; results will depend on economic assumptions,
on modelling assumptions, and on assumptions about actions taken in response to the
economic scenario.
This illustrative recession scenario assumes significant reductions in consumer spending
and business investment, which lead to eight consecutive quarters of negative GDP
growth. This results in a significant increase in unemployment and material nationwide
falls in property prices.
Estimated portfolio losses under these stressed conditions are manageable and within the
Group's capital base, with cumulative total losses at $2.7b over three years (net of LMI
recoveries).
Cumulative
reduction in
house prices
•
-32.3%
-38.8% -31.7%
Portfolio size ($b)
295
294
287
278
Outcomes
Year 1 Year 2
Year 3
The results have marginally improved from the stress test six months ago. Key reason for
the stressed losses reduction is the improved property price outlook and the impact of the
three rate cuts since May 2019, which are reflected in the underlying scenario.
Net Losses ($m)
286
1,282
1,141
Net losses (bps)
10
45
41
1.
Based on mortgage exposure at default and conditions as at 31 March 2019
ANZ
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