Reserve Bank of Australia (RBA) Governor Philip Lowe said on Friday that policymakers had no concerns about the stability of the country's banking system as unemployment rises and millions of dollars in loans are deferred.
The comments come as Commonwealth Bank of Australia <CBA.AX>, the country's biggest bank, reported nearly 20,000 of its mortgages are held by people receiving jobless benefits because of COVID-19.
Earlier in the day, smaller rival National Australia Bank Ltd <NAB.AX> conceded that many clients still faced an uncertain future, with only about 16% of those customers who had requested home loan deferrals restarting their payments.
Banking analysts have warned of larger loan losses, weaker profits and smaller dividends, particularly when the government's COVID jobless benefits run their course at the end of this year.
"I don't have any concerns about the stability of the banking system at all," Lowe said, responding to questions at a parliamentary economics committee.
"The banks went into this episode with the highest level of capital. They're in a strong position to provide the credit the country needs," Lowe added.
He noted the bigger issue was the loss of jobs and income as a result of the pandemic.
Unemployment is now at a 22-year high of 7.5% and is expected to hit 10% this year, while wage growth is crawling at its weakest pace on record.
Government figures show about 1.3 million Australians have applied for the COVID jobless benefit, called JobSeeker.
"The solution to most problems we face is kind of creating jobs, and ... it's aggregate demand and environment that's conducive to hire people and income support so that's the solution if you're worried about loan deferrals," Lowe said.
(Reporting by Swati Pandey; Editing by Tom Hogue and Gerry Doyle)
