Rising property prices, household debt threaten big bank credit ratings

Rising property prices

Australia’s banks could have their stand-alone credit ratings cut by Standard & Poor’s if household debt outpaces economic growth by 5 percentage points or if house price growth outpaces the inflation rate by more than 4 percentage points.

In a stark warning by the credit rating agency, which already has the major banks’ AA- credit ratings on a negative outlook, it said that economic risk was on the rise in Australia, which may force it to downgrade Australia’s banks.

The move would not result in an automatic downgrade of the AA-rating as the banks benefit from the so-called “too big to fail” support afforded them by the government, which is rated AAA.

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The author Paul