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Risk Optus breach can weaken banks: RBA

The central bank is warning that significant cyber breaches like the one levelled against Optus have the power to send shock waves through Australia’s financial institutions, AAP is reporting.

The Reserve Bank of Australia says the threat of further cyber incidents remains high and has the potential to destabilise the financial system by increased fraud.

Financial fraud from stolen data could then undermine confidence in banks and the banking system, the RBA says in a report.

The recent Optus breach and other large-scale hacks of personal data highlight the need for regulators and financial institutions to continue strengthening their cyber resilience, it says.

In response to the Optus breach, the government is moving to reduce red tape on the sharing of information with banks to allow them to implement better safeguards and monitoring systems.

The changes, announced on Thursday, would let the telcos temporarily share key information such as driver’s licence, Medicare and passport numbers with financial service firms.

Optus would also be able to share identifiers with Commonwealth, state and territory agencies to prevent fraud.

The changes are due to be presented to the governor-general on Friday.

Peter Hannam

RBA report sheds light on future prospects for China and climate

Two other quick takeaways from the RBA’s report is some pessimism about China’s prospects – important of course for the price of Australian commodity prices (plus, of course, the livelihoods of 1.4bn people).

Despite government efforts, “the property sector remains under considerable stress,” the RBA said.

This threatens to expose longstanding vulnerabilities affecting local governments, the shadow banking sector and small banks.

And just in case you thought the RBA was worried about the here and now:

[C]limate change and extreme weather events have the potential to affect economies and societies on a global scale, and thereby present a systemic challenge for private institutions and policymakers,” it said. “Both physical and transition risks could result in large losses for financial institutions that are yet to put in place adequate risk controls and resilience strategies.

On second thoughts, given the storms in Victoria today and the worsening flood situation in NSW, perhaps those concerns are about both the here and the now.

Peter Hannam

What will tighter financial conditions mean?

The impact, of course, would worsen, along with interest rates. Were the cash rate to increase by another 100bp (as indeed investors are now betting), the share of households forking out at least 30% to repay their mortgage would rise to about one in four, the RBA says.

For now, there’s a similar tale of businesses coping with higher rates … although the construction sector is among those doing it tougher (as indicated by that earlier post about a record rise in material costs).

An indication, though, that the squeeze is yet to trigger much of a rise in bankruptcies is that banks have been reducing the amount they are setting aside for bad debt.

RBA sees potential for tighter financial conditions, “disorderly declines” in markets

Peter Hannam

As for those global conditions, things could “tighten further” the RBA says, not least because of rising inflation, slowing growth, “heightened geopolitical tensions” – and so on.

Should that tightening happen, there’s the potential for increased financial stability risks, “including the potential for a disorderly decline in asset prices and for high leverage and liquidity mismatches in some investment funds to amplify strains in global funding markets”.

(There’s even one mention of troubled Swiss investment bank, Credit Suisse, which the RBA notes is facing investors wanting more protection against a possible default.)

Of course, most Australians are focussed on the home front, and what the RBA thinks about household pain as interest rates rise. For context, they provide this handy chart, which shows where real estate prices are falling – and where they aren’t, yet.

Households, companies and banks are generally in a “a strong financial position” as they enter “this more challenging environment”. But resilience is “unevenly distributed”, as you’d expect.

The Covid lockdown period allowed some folks to save a lot more and make early payments on their mortgages. About a quarter, though, have little buffer at all.

The RBA said:

A small number of borrowers have both high debt relative to their income and low saving and equity buffers; these households are particularly vulnerable to shocks.

The Bureau of Meteorology is predicting up to 25mm of rain to fall across Melbourne today, with flood warnings issued in parts of Victoria.

You can check the warnings here:

Rescuers try to free whales caught in QLD shark nets

Rescuers are attempting to free two humpback whales entangled in a shark net off a Sunshine Coast beach, AAP has reported.

The whales – reportedly a mother and her calf – became trapped in the same net as they made their annual migration south.

Humane Society International marine biologist Lawrence Chlebeck said the current migration season had involved about double the number of entanglements seen in previous years.

“A mother and calf in the same net, stressed and tangled, is a worst-case scenario,” he said in a statement on Friday.

Animal rights groups have previously warned of increased risk as the migrating humpbacks head south with their newborn calves and want the shark nets removed.

“The shark nets must be removed in favour of new technological solutions, already successfully trialled by Queensland and New South Wales governments, that can better reduce the risk of shark bite without endangering migrating humpbacks and killing dolphins and turtles,” Mr Chlebeck said.

“There’s a better way.”

For everyone not in Melbourne right now, let me tell you – it is very wet:

Six new solar farms approved for Victoria

Six solar farms to power 300,000 homes across Victoria will be built, as the state pushes on with plans to power all government operations with green energy, AAP reports.

Energy minister, Lily D’Ambrosio, said six new solar farms and four big batteries were approved as part of Victoria’s second renewables auction.

The projects in Bridgewater, Fulham, Ouyen, Traralgon, Horsham and Glenrowan will generate 1460 gigawatt hours of energy each year, enough to power 300,000 homes.

Victoria aims to power its entire public sector infrastructure – including government schools, hospitals and the entire Melbourne train and tram network – with renewable energy by 2025.

D’Ambrosio told reporters in Glen Waverley:

The projects will also deliver $1.5 billion in investment and will create almost 1000 jobs right across the state.

It comes a week after energy giant AGL announced it would close its brown coal-fired Loy Yang power plant by 2035, up to 10 years earlier than planned.

Josh Butler

NSW Young Liberals express “strong disagreement” with Teena McQueen

The criticism of Liberal Party vice president Teena McQueen continues overnight, with word that the NSW Young Liberal council called on her to resign and the party’s executive to take “appropriate action.”

McQueen told the CPAC conference that attendees should “rejoice” at the defeat of “lefties” in the party at the last federal election – which has been interpreted to mean celebrating the loss of moderates like Dave Sharma, Tim Wilson and Trent Zimmerman. Sharma and Wilson fired back yesterday, while shadow foreign minister Simon Birmingham said McQueen should resign.

We’ve contacted McQueen through the Liberal Party several times for comment but heard nothing back. We’re told the NSW Young Liberals passed the following motion overnight:

That the NSW Young Liberals:
1. Express its strong disagreement and disappointment with the comments made by Liberal Federal vice president Teena McQueen’s at the recent CPAC conference.
2. Note that the comments made by Ms McQueen are not representative of the NSW Young Liberals or the NSW division.
3. Remind Ms McQueen that the role of federal executive members is to work towards the election of endorsed Liberal candidates and a Federal Coalition government.
4. Call on Chris Stone and the federal and state executives of the Liberal party to investigate the comments and take appropriate action to prevent any further damage to the party’s reputation and electoral chances.
5. Call on Teena McQueen to resign from her position as federal vice president.

MPs asked to weigh into Essendon saga

Sky News is asking Hume and McAllister about the Essendon saga. McAllister says she isn’t going to weigh into the matter (unlike the opposition leader – see Josh Butler’s earlier blog post) but she does remark Australia as a nation has been “pretty intolerant of intolerance”.

You want a country for people to be able to get ahead no matter who they love, where they live or who they worship.

She highlighted an inclusive society was the key message of the prime minister’s speech on the night of his election victory.

Labor MP says government will not be ‘lectured’ by opposition on stage-three tax cuts

Sky News has shadow finance minister Jane Hume squaring off against assistant climate change minister Jenny McAllister. The topic is stage-three tax cuts.

Hume is coming out with her new favourite verb “crab-walk” to describe Labor’s speculated U-turn, which she was using in her media round yesterday too. However, crabs usually walk sideways, not backwards but no one seems to have asked Hume to explain what she actually means by the term then.

If Labor crab walks away we’ll see their true colours.

McAllister says that the government is “working through all those issues” on stage-three tax cuts. Two days away from the 10th anniversary of Julia Gillard’s anti-misogyny speech, McAllister has echoes of the former Labor leader when she responds to Hume:

We’re not going to be lectured to people who were unable to make an energy policy, address the skills crisis for 10 years.