Nathan Zaia: So I think most in the market expected the RBA to raise by 50 basis points. So they went 25 basis points and I think that lowers the probability of defaults for banks and that's probably in two ways. So how high rates end up going, and how quickly they get there so that can impact obviously the very highly leveraged borrowers that might be put under stress the higher rates go. And then also if you're increasing gradually, it gives people time to reassess their living expenses. You get wage increases in, call it the worst case situations you can even sell your home, downsize, you can become a renter. So you can take steps to remedy your situation before you default. So I think what the RBA has shown is, they're happy to slow increases and even pause and wait and see the effects of the increases they've already put through really. So there is a time lag between RBA increases rates, banks make a decision, pass on the new rate to their customers, then it's the next month that the customer actually pays that. So we haven't seen the full impact of these rate increases yet. So I think that's why the RBA felt we can slow things down and wait and see.

So I think it is a tug of war in a higher rate environment between the positives on margins and the negative with higher loan losses and we think that the banks will be winners as rates increase. On the margins, so we track I think about 10 banks rates on their websites and since the first rate increases, excluding the most recent increase rates had gone up to 2.25%. The banks had lifted their pricing 1.9%. So passing on a lot of that in terms of new lending and on existing loans they've passed on the full amount, so they're pretty quickly charging their borrowers a lot more. And then if you look at the other side and where they get their funding from customer deposits make up a big part of that. And there's some attractive term deposit rates out there at the moment, but they make up a smaller part of that deposit funding mix especially for the major banks and transaction accounts they're still paying basically nothing on. And you've got those savings rates. So they might offer a good introductory rate, but then it falls away to a much lower rate and and customers often do end up there.

So across the whole funding mix, definitely not rising as fast. So that's why we think margins are going to be up 10 basis points next year, so bottoming in 2022. But then on the bad debt side of the equation, we do think, things do normalize in a sense. So in the last couple of years, stimulus has pretty much meant no losses for the banks. So yeah, way we look at the starting point and the banks are well provisioned, households as good shape as they can be in terms of, offset accounts, equity buffers, payments in advance, unemployment's low. We don't think there's oversupply of housing. So I think the starting point is good as we enter this this rate cycle, so our base case is a return to more normal loss rates and not some GFC style spike.