A key insight provided by these data is the untangling of credit demand and supply factors in the market. Our own work in the Central Bank can be described as having two broad themes. Firstly, as addressed by the Governor this morning, we are keenly engaged in the domestic policy debate around the fallout from the pandemic.
In 2009 banks’ gross income will continue to contract, after an estimated fall of about 5 per cent in 2008, despite the still substantial growth on the order of 8 per cent in net interest income. As in the past it is likely that the decline in economic activity and interest rates will have a negative impact on interest income.