Time to 'short' Australia's housing bubble (update 5). Australian banks funding blowouts due re: precurser when Spain's property market went bust.

Yes, Australia has a resource boom which fuels China's boom. Funny thing is though Australia also has a debt boom, or bubble (which of course doesn't dwarf China credit bubble). But mining hasn't been able to offset Australia's dependency on a consumer debt binge and very few Australia's are receiving the benefit of a mining boom. Apart from Australia maintain a AAA rating, with the ability for the Australian government to raise capital in the debt markets. It also must be noted that with oversupplied bond markets a premium yield is being paid for AUD bonds. Much like Spain, in fact a lot like Spain (and Spain is almost bankrupt without ECB help). Both Spain and Australia have (or had: Spain property/economy went bust in 2010 re: PIIGS) housing bubbles note graph below with Australia's and Spain's housing markets.



Australia's major lender CBA is now showing the hallmarks of a funding blowout, as interest rates on debt/bonds turn upward, value turns down hence the possibility that bond holders of Australian bank debt may ask for a higher premium on the yield. Mix this with possible bank 'off the balance sheet' losses on MBS's (mortgage backed securities) and CMBS (commercial mortgage back securities), business bankruptcy and lending slowdown; and we have a problem brewing in Australia banks, as funding costs are then passed onto the the borrower exasperating a bust scenario (housing/businesses).

The realty of Australian banks, particularly CBA, is what Spanish banks endured prior and after to the Spanish housing market imploding in 2008/2009.

A funding blowout.

And then eventually: (WSJ 26 Oct 2010)

"Spain's banks are selling valuable branches and seeking government help to find renters for foreclosed homes as they try to prop up their bottom lines amid continuing trauma in their deteriorating loan portfolios and other problems.

With profit margins tumbling, Spanish banks of all sizes—from big Banco Bilbao Vizcaya Argentaria SA to smaller regional savings banks known as cajas—are taking such steps as they feel a squeeze from high funding costs and other ills.

Among the top tactics they are using is the sale and leaseback of bank branches, allowing them to book a quick gain on the transaction, which can be used to absorb losses. In addition, the banks are fighting fiercely for deposits, with some banks, such as Banco Popular Español, recently offering a one-year interest rate of 4.5%.