RBA interest rates: Michele Bullock declares credit crunch no threat for Australian financial markets

Reserve Bank boss Michele Bullock has played down fears of a credit crunch that would damage international financial markets and spark economic disruption. Ms Bullock was responding to reports that the US Federal Reserve had pumped tens of billions of dollars into America’s banking system over the weekend. Bloomberg reported on Saturday that money markets were “under strain” as central banks walk back from rate cut plans and liquidity tightens. Short term interest rates had lifted, according to the financial newswire. A credit crunch would mean lending dries up and slows wider economic activity, which would also hit the jobs market. “The Fed’s onto it,” Ms Bullock said. “I don’t think there will be a credit crunch. That’s exactly what the Fed is trying to avoid.” Her comments came as the RBA kept interest rates unchanged for November and gave a strong signal no further cuts should be expected. Ms Bullock said the Fed had moved to shore up reserves — bank deposits held at the central bank — as they were “about as low as they can go without introducing difficulties . . . for banks trying to get liquidity.” There was also no threat to financial markets in Australia, she declared. “There isn’t a credit crunch here,” Ms Bullock said. “There is liquidity out there and there is credit out there for those who choose to take it up.” Analysis released by the RBA in the Statement of Monetary Policy for November said reserves in Australia “still exceed ample levels”. Credit conditions more broadly looked favourable with borrowing growing faster than the country’s overall economy, underpinned by business lending. Yet the world’s biggest economy may not be in such good shape. Murmurings about financial worries in America have been broader than just money markets. Analysts have been keeping a close eye on the country’s private credit system after two businesses — sub-prime auto lender Tricolor and car part supplier First Brands — hit the wall in recent weeks.