Experts forecast Australian banks will cut or defer dividends: Finder Survey
Banks may increase variable mortgage rates to recoup pandemic-induced losses despite a stagnant cash rate, according to experts.
In this month's Finder RBA Cash Rate Survey, all the experts surveyed expect a cash rate hold in September (40/40), more than half of those who weighed in (57%, 16) believe that banks will raise their variable mortgage rates despite the Reserve Bank indicating that the cash rate will remain motionless for some time.
Another course of action the banks took is, earlier in August, Westpac and ANZ announced that they are cutting or deferring dividends to shore up company profits.
The majority of economists who weighed in (88%, 22) believe that the nation’s other big banks will soon follow suit by slashing dividends or removing them altogether.
Cooke said that banks are taking a cautious approach as we enter a period of economic uncertainty.
“Banks are slashing shareholder dividends in an attempt to mitigate the financial disruption caused by the virus."
“This won’t come as welcome news for existing shareholders, but many investors will be seeing these plunging share prices as a great opportunity to buy discounted stocks,” he said.
Economic sentiment spikes
Finder’s Economic Sentiment Tracker, which gauges five key indicators – housing affordability, employment, wage growth, cost of living and household debt– shows a significant increase in overall economic sentiment since its lowest point in March 2020, rising from 8% to 24% in August
Despite the uncertainty regarding the virus, more than half (57%, 20) of respondents believe that Australia will see GDP growth in 2020.
Leanne Pilkington of Laing+Simmons said Australia has been able to weather the economic storm of coronavirus better than other nations.
"Relatively speaking, the economic fallout of the coronavirus that is reverberating around global markets has not impacted Australia as hard as many other nations.
Even considering Victoria’s second wave and the potential for subsequent outbreaks elsewhere, employment figures are encouraging and other key indicators point to our economy’s overall resilience,” she said.
