Global banks warns of tipping point for Australian superannuation as interest rates rise | ABC NEWS

What would it take to put the global economy into a tailspin? The Bank of America, which is worth roughly $US275 billion, and dependent to a degree on functioning financial markets, is asking itself that question. The answer lies in the cost of debt. Low productivity, excess demand, the boom in artificial intelligence, and the Iran war, are all pushing up the cost of borrowing. Despite this, global interest rate increases have not yet done too much damage to share or property markets, or indeed many advanced economies. But Bank of America's head of interest rates strategy, and former analyst with the New York Federal Reserve, Mark Cabana, has estimated the cost of borrowing, or level of interest rates, that would cause financial damage. Mark Cabana recently visited Sydney to, among other things, address the nation's superannuation heavyweights. "I know that they are extremely focused on this question as well of when interest rates will be restricive to growth," he said. Australian superannuation funds have tens of billions of dollars' worth of Australian workers' cash tied up on Wall Street, including the big tech companies. "Our guidance to them would be that they should become much more concerned if you do see that macro data continues to be strong and that financial conditions are not showing signs of caring." Put simply, Cabana is saying that if the US economy continues to grow, and inflation pressures persist, US interest rates will need to push higher. "That will mean that rates may need to rise further and rates that have a 5 per cent or 5.5 per cent level," he said.

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