RBNZ post-GFC measures helped limit the initial covid impact

But the central bank seems blind to the covid lessons

They say generals always fight the last war; one great thing about the Reserve Bank’s response to the covid pandemic is that many of the changes it made to banking in the wake of the global financial crisis (GFC) proved to be prophylactic when covid hit.

Thankfully, our banks and the Australian parents of our big four banks didn’t engage in the shenanigans that caused the GFC.

They weren’t lending on mortgages at 110% of a property’s value, they weren’t making those famous ninja loans – loans to those with no income, no jobs and no assets – and then packaging up such loans, slicing them into tranches and getting the ratings agencies to give their top tiers “AAA” ratings so pension funds would buy them.

Essentially, the GFC was caused by the collapse of these structures.