For example, while community banks account for just 17 percent of financial industry assets, they are responsible for some 53 percent of bank lending to small businesses. Further, the health of the community banking sector has improved significantly since the financial crisis.
It will be difficult for Australia to stay on that narrow path to a soft landing if there is further material bad news on the global economy. Another factor that will determine how successfully we navigate that narrow path is how inflation expectations and the general inflation psychology evolve in Australia. To date, medium-term inflation expectations have remained well anchored, which is good news.