The banks will be hit by a massive write-down of $4 billion, with more than $1 billion in additional costs expected to be incurred by the Australian banking sector in the coming years, as a result of the collapse of the housing market.
In a statement, the banks said the $4bn write-off would cover the cost of servicing mortgages, and it would provide “the necessary cushion” to help the sector recover.
The banks said they were still working to find a suitable replacement for their debt, but said they believed the financial sector had “recovering”.
“While there is an understanding from the regulators that the current write-offs would be sufficient to cover the costs incurred, the actual cost of the write-downs is expected to increase over time,” the statement said.
“The write-ups will be based on current credit ratings and will have a maximum effect of $5.4 billion.”
It said the write down was “comprehensive and will cover a wide range of costs”.
The banks are still working out the impact of the financial crisis, with the Australian Bureau of Statistics forecasting the Australian economy could shrink by 1 per cent this year and by 3 per cent next year.
“This could result in a significant impact on the economy and potentially on the availability of capital for businesses,” the ABS said in a statement.
“Given the importance of the Australian financial system to the economy, it is crucial that the Government takes the necessary action to protect it.”
The statement said the banks expected to make significant losses over the next three years.
The Bank of Queensland has said it expects to incur losses of up to $3 billion, and the Australian Financial Services Union (AFSU) is also forecasting significant losses.
“While we expect the overall impact of this write-up to be modest, the overall size of the losses will significantly impact on our ability to service our obligations and financial position,” the bank said in the statement.
The ABS forecast that the Australian unemployment rate would increase to 7.3 per cent by 2021, up from 6.3, from 2020.
The economy grew by 0.2 per cent in the quarter to the end of June.
The Australian Bureau for Statistics said the unemployment rate was 5.9 per cent for the 12 months to June, a decline of 0.1 percentage points from the previous quarter.