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Aussie housing downturn the top risk for money managers: Fitch

Sydney

A MAJORITY of fixed income investors surveyed by Fitch Ratings ranked Australian housing market downturn as the top risk for local credit markets, a remarkable shift in sentiment from just a year ago though they were less gloomy about the jobs sector.

The survey, conducted between March 11 and March 25, represents views of managers of more than A$500 billion (S$477 billion) of fixed income assets who account for over three-quarters of Australia's real money market, Fitch said.

About 70 per cent of those polled saw tumbling house prices as posing the "most serious threat" to Australian credit markets - which includes government and semi-government papers and residential mortgage-backed securities - over the next 12 months. That compares with only 29 per cent who had rated the slowdown as "high risk" a year ago.

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The majority predicted further declines in homes prices this year though not one forecast the unemployment rate to edge above 6 per cent over the next 12 months from 5 per cent now, Fitch said.

The labour market gained particular significance after Australia's central bank signalled that future cuts in interest rates depended on employment improving after holding its policy rate at a record low 1.5 per cent for a 30th straight meeting on Tuesday.

Fitch said the resilience in the employment sector "should provide some support to the property market at a time when house prices are falling, considering the link between unemployment and mortgage defaults". REUTERS