Murray Signals A Correction Is Coming And Australia's Banks Need To Be Ready

David Murray / IMF

David Murray has joined RBA governor Stevens in warning that asset prices around the world have been pumped up by “post-crisis monetary settings”.

Like Stevens, who has been warning for months now that when the Fed actually moves to raise rate markets, financial market sentiment might look very different, Murray said:

“That is going to cause a correction at some point, which will put more ­political pressure on financial systems.”

Already the Murray Inquiry in its interim report suggested that Australian banks may not be as capital rich as they suggest, saying they “are around the middle of the range relative to other countries”.

The key, according to Murray, is that Australia is in a difficult situation with regard to APRA’s enforcement of the Basel III rules because “it didn’t appear to be damaged by the [2008] crisis”, yet the system still needs to be strengthened.

It’s position that the Australian Bankers Association takes issue with and CEO Steven Munchenberg told the AFR that “Given the demonstrated strengths of the current system, regulation and policy changes should only be made where there is clear evidence the change is needed and benefits outweigh costs and consequences”.

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