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<!DOCTYPE html>
<html lang="en">
<head>
<meta charset="utf-8">
<title>Industry Analysis Report — Q1 2026 (Board Summary)</title>
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<body>
<h1>Industry Analysis Report — Q1 2026</h1>
<p><em>Board Summary variant. Generated 2026-06-16.</em></p>
<div class="summary-box">
<p>Macro and downturn overlays as of 2026-06-15. Property cycle data as of 2026-03-01.</p>
<p>This is a summary view for non-technical reviewers. Every table traces back to the canonical CSV contracts in <code>outputs/contracts/</code>.</p>
</div>
<h2>1. Macro conditions for credit assessment & risk management</h2>
<p>Before scoring any industry or deal, the engine reads where the economy and property markets currently sit - the conditions a credit team assesses against, and the base of every stress scenario in Section 2. The economy-wide headline rates (GDP, unemployment, CPI, WPI) are fetched live from the latest ABS releases (reading 'observed'), joining the live cash rate; a few series with no clean current public index are stated and flagged.</p>
<p class="caption">Current macro & property conditions (live where a clean public series exists)</p>
<table>
<thead><tr>
<th>Condition</th>
<th>Current level</th>
<th>Reading</th>
<th>Source</th>
</tr></thead>
<tbody>
<tr>
<td>GDP growth (real, YoY %)</td>
<td>2.5</td>
<td>observed</td>
<td>ABS 5206 National Accounts (Mar 2026, real SA, through-the-year)</td>
</tr>
<tr>
<td>Unemployment rate (%)</td>
<td>4.3</td>
<td>observed</td>
<td>ABS 6202 Labour Force (Mar 2026, seasonally adjusted)</td>
</tr>
<tr>
<td>Cash rate (%)</td>
<td>4.35</td>
<td>live</td>
<td>RBA F1 cash-rate table (+0.50pp 1y)</td>
</tr>
<tr>
<td>Inflation (CPI, YoY %)</td>
<td>2.4</td>
<td>observed</td>
<td>ABS 6401 CPI (Mar 2026 quarter, all groups, through-the-year)</td>
</tr>
<tr>
<td>Wage growth (WPI, YoY %)</td>
<td>3.3</td>
<td>observed</td>
<td>ABS 6345 Wage Price Index (Mar 2026 quarter, through-the-year)</td>
</tr>
<tr>
<td>House-price growth (YoY %)</td>
<td>4</td>
<td>stated</td>
<td>stated (ABS 6416 RPPI discontinued after Dec-2021; no current free public index)</td>
</tr>
<tr>
<td>Exchange rate (TWI, % change)</td>
<td>0</td>
<td>stated</td>
<td>RBA F11 exchange rates</td>
</tr>
<tr>
<td>Industry / sector output (YoY %)</td>
<td>2</td>
<td>stated</td>
<td>ABS 8155 Australian Industry + 5676 Business Indicators</td>
</tr>
<tr>
<td>Commercial-property prices (% change)</td>
<td>0</td>
<td>assumption</td>
<td>assumption</td>
</tr>
<tr>
<td>Vacancy rate (office, %)</td>
<td>12</td>
<td>assumption</td>
<td>assumption</td>
</tr>
<tr>
<td>CRE rents (% change)</td>
<td>0</td>
<td>assumption</td>
<td>assumption</td>
</tr>
<tr>
<td>CRE cap rates (%)</td>
<td>6</td>
<td>assumption</td>
<td>assumption</td>
</tr>
</tbody></table>
<p>Property-secured lending splits into residential and commercial. Residential house-price growth is a stated reading (the ABS RPPI was discontinued after Dec-2021). Commercial-property risk is read from real ABS non-residential building approvals - currently softest for offices, firmest for warehouses.</p>
<p class="caption">Commercial property cycle by building type (ABS 8731 non-residential approvals)</p>
<table>
<thead><tr>
<th>Building type</th>
<th>Cycle stage</th>
<th>Softness (1 firm - 5 soft)</th>
<th>Approvals YoY %</th>
<th>Region-risk band</th>
</tr></thead>
<tbody>
<tr>
<td>Offices</td>
<td>downturn</td>
<td>4.30</td>
<td>-19.8</td>
<td>High</td>
</tr>
<tr>
<td>Agricultural and aquacultural buildings</td>
<td>downturn</td>
<td>3.90</td>
<td>-27.0</td>
<td>High</td>
</tr>
<tr>
<td>Commercial Buildings - Total</td>
<td>slowing</td>
<td>3.80</td>
<td>-49.7</td>
<td>Elevated</td>
</tr>
<tr>
<td>Retail and wholesale trade buildings</td>
<td>slowing</td>
<td>3.40</td>
<td>+6.5</td>
<td>Elevated</td>
</tr>
<tr>
<td>Total Non-residential</td>
<td>slowing</td>
<td>3.35</td>
<td>-15.9</td>
<td>Elevated</td>
</tr>
<tr>
<td>Education buildings</td>
<td>slowing</td>
<td>3.25</td>
<td>-31.3</td>
<td>Elevated</td>
</tr>
<tr>
<td>Aged care facilities</td>
<td>slowing</td>
<td>3.20</td>
<td>-22.0</td>
<td>Elevated</td>
</tr>
<tr>
<td>Short term accommodation buildings</td>
<td>neutral</td>
<td>3.10</td>
<td>+112.0</td>
<td>Medium</td>
</tr>
<tr>
<td>Health buildings</td>
<td>neutral</td>
<td>2.40</td>
<td>-36.0</td>
<td>Medium</td>
</tr>
<tr>
<td>Industrial Buildings - Total</td>
<td>growth</td>
<td>2.15</td>
<td>+94.8</td>
<td>Medium</td>
</tr>
<tr>
<td>Warehouses</td>
<td>growth</td>
<td>1.70</td>
<td>+108.5</td>
<td>Medium</td>
</tr>
</tbody></table>
<p>Macro regime (as of 2026-06-15): cash-rate regime 'restrictive_rising', arrears Low / Improving, overall flag 'base'. The cash rate is 4.35% (+0.50pp over the year). A 'base' regime applies no recession overlay at current readings; Section 2 pre-computes the downturn impact.</p>
<h2>2. Macro drivers for stress testing - per product and per industry</h2>
<p>A macro-driven stress layer turns macroeconomic scenario paths into PD / LGD / EAD multipliers per portfolio segment, then rolls facility-level stress up to a portfolio expected-loss total — answering 'if the economy turns, how much worse do losses get, and for which portfolios?'.</p>
<p>Stress testing answers one question: if the economy turns bad, how much more does the bank lose? A scenario hurts borrowers and collateral, which shows up as higher PD (chance of default), LGD (loss if they default) and EAD (amount owed). This layer turns one scenario into ready-to-apply PD / LGD / EAD multipliers per portfolio segment and per industry - the input a downstream monitoring model multiplies onto its own facilities. It uses the simplest standard method (a multiplier map); a data-rich bank would use a statistical satellite model. Mild ~ two quarters of zero growth (Basel CRE36.51); severe is GFC-like but plausible (APS 220 s72); the roll-up takes no diversification benefit (APG 113 s92); figures are illustrative, to be validated in production (APS 220 s76).</p>
<p class="caption">Macro scenario paths - stressed level by scenario</p>
<table>
<thead><tr>
<th>Variable</th>
<th>Unit</th>
<th>Source</th>
<th>base</th>
<th>mild</th>
<th>moderate</th>
<th>severe</th>
</tr></thead>
<tbody>
<tr>
<td>Cash rate (%)</td>
<td>%</td>
<td>RBA F1 cash-rate table</td>
<td>4.35</td>
<td>4.6</td>
<td>4.85</td>
<td>5.1</td>
</tr>
<tr>
<td>Commercial-property prices (% change)</td>
<td>% change</td>
<td>assumption</td>
<td>0.0</td>
<td>-7.0</td>
<td>-15.0</td>
<td>-28.0</td>
</tr>
<tr>
<td>CRE cap rates (%)</td>
<td>%</td>
<td>assumption</td>
<td>6.0</td>
<td>6.4</td>
<td>6.9</td>
<td>7.6</td>
</tr>
<tr>
<td>CRE rents (% change)</td>
<td>% change</td>
<td>assumption</td>
<td>0.0</td>
<td>-4.0</td>
<td>-9.0</td>
<td>-16.0</td>
</tr>
<tr>
<td>Exchange rate (TWI, % change)</td>
<td>% change</td>
<td>RBA F11 exchange rates</td>
<td>0.0</td>
<td>-5.0</td>
<td>-10.0</td>
<td>-15.0</td>
</tr>
<tr>
<td>GDP growth (real, YoY %)</td>
<td>% yoy</td>
<td>ABS 5206 National Accounts (Mar 2026, real SA, through-the-year)</td>
<td>2.5</td>
<td>0.7</td>
<td>-0.8</td>
<td>-2.8</td>
</tr>
<tr>
<td>House-price growth (YoY %)</td>
<td>% yoy</td>
<td>stated (ABS 6416 RPPI discontinued after Dec-2021; no current free public index)</td>
<td>4.0</td>
<td>-4.0</td>
<td>-11.0</td>
<td>-21.0</td>
</tr>
<tr>
<td>Industry / sector output (YoY %)</td>
<td>% yoy</td>
<td>ABS 8155 Australian Industry + 5676 Business Indicators</td>
<td>2.0</td>
<td>0.0</td>
<td>-2.0</td>
<td>-5.0</td>
</tr>
<tr>
<td>Inflation (CPI, YoY %)</td>
<td>% yoy</td>
<td>ABS 6401 CPI (Mar 2026 quarter, all groups, through-the-year)</td>
<td>2.4</td>
<td>3.2</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr>
<td>Unemployment rate (%)</td>
<td>%</td>
<td>ABS 6202 Labour Force (Mar 2026, seasonally adjusted)</td>
<td>4.3</td>
<td>5.5</td>
<td>6.8</td>
<td>8.3</td>
</tr>
<tr>
<td>Vacancy rate (office, %)</td>
<td>%</td>
<td>assumption</td>
<td>12.0</td>
<td>14.0</td>
<td>16.0</td>
<td>19.0</td>
</tr>
<tr>
<td>Wage growth (WPI, YoY %)</td>
<td>% yoy</td>
<td>ABS 6345 Wage Price Index (Mar 2026 quarter, through-the-year)</td>
<td>3.3</td>
<td>2.8</td>
<td>2.3</td>
<td>1.5</td>
</tr>
</tbody></table>
<p class="caption">Which macro drivers move which portfolio (illustrative)</p>
<table>
<thead><tr>
<th>Portfolio</th>
<th>Material macro drivers</th>
</tr></thead>
<tbody>
<tr>
<td>Residential mortgages</td>
<td>unemployment, cash rate, wage growth, house prices</td>
</tr>
<tr>
<td>Credit cards</td>
<td>unemployment, wage growth, inflation</td>
</tr>
<tr>
<td>SME lending</td>
<td>GDP, unemployment, cash rate, sector output</td>
</tr>
<tr>
<td>Corporate lending</td>
<td>GDP, sector output, cash rate, exchange rate</td>
</tr>
<tr>
<td>Commercial property</td>
<td>property prices, vacancy, rents, cap rates, cash rate</td>
</tr>
<tr>
<td>Development finance</td>
<td>property prices, GDP, vacancy, cash rate</td>
</tr>
</tbody></table>
<p class="caption">Macro-derived segment multipliers (PD / LGD / EAD)</p>
<table>
<thead><tr>
<th>Segment</th>
<th>Scenario</th>
<th>PD x</th>
<th>LGD x</th>
<th>EAD x</th>
</tr></thead>
<tbody>
<tr>
<td>residential_mortgages</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>residential_mortgages</td>
<td>mild</td>
<td>1.4129</td>
<td>1.1523</td>
<td>1.0649</td>
</tr>
<tr>
<td>residential_mortgages</td>
<td>moderate</td>
<td>1.8357</td>
<td>1.2936</td>
<td>1.1291</td>
</tr>
<tr>
<td>residential_mortgages</td>
<td>severe</td>
<td>2.35</td>
<td>1.48</td>
<td>1.2</td>
</tr>
<tr>
<td>credit_cards</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>credit_cards</td>
<td>mild</td>
<td>1.4906</td>
<td>1.1267</td>
<td>1.0786</td>
</tr>
<tr>
<td>credit_cards</td>
<td>moderate</td>
<td>1.9886</td>
<td>1.2535</td>
<td>1.1533</td>
</tr>
<tr>
<td>credit_cards</td>
<td>severe</td>
<td>2.65</td>
<td>1.42</td>
<td>1.24</td>
</tr>
<tr>
<td>sme_lending</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>sme_lending</td>
<td>mild</td>
<td>1.5241</td>
<td>1.1521</td>
<td>1.0906</td>
</tr>
<tr>
<td>sme_lending</td>
<td>moderate</td>
<td>2.0259</td>
<td>1.3053</td>
<td>1.1757</td>
</tr>
<tr>
<td>sme_lending</td>
<td>severe</td>
<td>2.65</td>
<td>1.54</td>
<td>1.28</td>
</tr>
<tr>
<td>corporate_lending</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>corporate_lending</td>
<td>mild</td>
<td>1.4823</td>
<td>1.1549</td>
<td>1.0913</td>
</tr>
<tr>
<td>corporate_lending</td>
<td>moderate</td>
<td>1.9307</td>
<td>1.3156</td>
<td>1.177</td>
</tr>
<tr>
<td>corporate_lending</td>
<td>severe</td>
<td>2.5</td>
<td>1.54</td>
<td>1.28</td>
</tr>
<tr>
<td>commercial_property</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>commercial_property</td>
<td>mild</td>
<td>1.5409</td>
<td>1.18</td>
<td>1.0968</td>
</tr>
<tr>
<td>commercial_property</td>
<td>moderate</td>
<td>2.127</td>
<td>1.3973</td>
<td>1.1958</td>
</tr>
<tr>
<td>commercial_property</td>
<td>severe</td>
<td>2.95</td>
<td>1.72</td>
<td>1.32</td>
</tr>
<tr>
<td>development_finance</td>
<td>base</td>
<td>1.0</td>
<td>1.0</td>
<td>1.0</td>
</tr>
<tr>
<td>development_finance</td>
<td>mild</td>
<td>1.6664</td>
<td>1.195</td>
<td>1.1116</td>
</tr>
<tr>
<td>development_finance</td>
<td>moderate</td>
<td>2.3292</td>
<td>1.4273</td>
<td>1.2219</td>
</tr>
<tr>
<td>development_finance</td>
<td>severe</td>
<td>3.25</td>
<td>1.78</td>
<td>1.36</td>
</tr>
</tbody></table>
<p class="caption">Demonstration - facility roll-up to portfolio EL (illustrative demo book)</p>
<table>
<thead><tr>
<th>Scenario</th>
<th>Facilities</th>
<th>Base EL ($)</th>
<th>Stressed EL ($)</th>
<th>EL uplift x</th>
</tr></thead>
<tbody>
<tr>
<td>base</td>
<td>6</td>
<td>79293.72</td>
<td>79293.72</td>
<td>1.0</td>
</tr>
<tr>
<td>mild</td>
<td>6</td>
<td>79293.72</td>
<td>153321.21</td>
<td>1.934</td>
</tr>
<tr>
<td>moderate</td>
<td>6</td>
<td>79293.72</td>
<td>256331.65</td>
<td>3.233</td>
</tr>
<tr>
<td>severe</td>
<td>6</td>
<td>79293.72</td>
<td>447755.57</td>
<td>5.647</td>
</tr>
</tbody></table>
<div class="flag flag-orange"><div class="flag-title">Macro stress - scope and governance</div><p>Illustrative scenario design — not calibrated regulatory stress. Base levels are current values from the named ABS/RBA series; the four CRE variables (commercial-property prices, vacancy, rents, cap rates) and all elasticities are labelled assumptions. The portfolio roll-up is exposure-weighted with no diversification benefit. Reverse stress: the moderate scenario (EL uplift 3.23x) first breaches a 2.0x illustrative appetite ceiling. A bank normally builds separate models per material portfolio or a pooled model with portfolio/sector effects; this layer supplies the macro-credit linkage either consumes.</p></div>
<p class="caption">Per-industry current-conditions drivers (feed the sector-output channel)</p>
<table>
<thead><tr>
<th>Industry</th>
<th>Employment YoY %</th>
<th>EBITDA margin %</th>
<th>Demand YoY %</th>
<th>Macro score (1-5)</th>
</tr></thead>
<tbody>
<tr>
<td>Accommodation and Food Services</td>
<td>+0.7</td>
<td>11.4</td>
<td>+112</td>
<td>2.60</td>
</tr>
<tr>
<td>Administrative and Support Services</td>
<td>+3.1</td>
<td>9.3</td>
<td></td>
<td>2.80</td>
</tr>
<tr>
<td>Agriculture, Forestry and Fishing</td>
<td>-5.1</td>
<td>14.6</td>
<td>-27</td>
<td>4.20</td>
</tr>
<tr>
<td>Arts and Recreation Services</td>
<td>-5.8</td>
<td>13.5</td>
<td>-46</td>
<td>3.60</td>
</tr>
<tr>
<td>Construction</td>
<td>+1.5</td>
<td>10.2</td>
<td>-16</td>
<td>3.20</td>
</tr>
<tr>
<td>Education and Training</td>
<td>+5.6</td>
<td>11.7</td>
<td>-31</td>
<td>3.40</td>
</tr>
<tr>
<td>Electricity, Gas, Water and Waste Services</td>
<td>+12.3</td>
<td>21.0</td>
<td></td>
<td>2.00</td>
</tr>
<tr>
<td>Health Care and Social Assistance</td>
<td>+3.7</td>
<td>16.7</td>
<td></td>
<td>2.80</td>
</tr>
<tr>
<td>Information Media and Telecommunications</td>
<td>-4.8</td>
<td>20.0</td>
<td></td>
<td>2.60</td>
</tr>
<tr>
<td>Manufacturing</td>
<td>-0.9</td>
<td>9.2</td>
<td>+95</td>
<td>3.40</td>
</tr>
<tr>
<td>Mining</td>
<td>-5.1</td>
<td>47.3</td>
<td></td>
<td>3.20</td>
</tr>
<tr>
<td>Other Services</td>
<td>+7.1</td>
<td>5.3</td>
<td></td>
<td>2.20</td>
</tr>
<tr>
<td>Professional, Scientific and Technical Services</td>
<td>+5.5</td>
<td>13.0</td>
<td></td>
<td>2.00</td>
</tr>
<tr>
<td>Public Administration and Safety</td>
<td>-1.2</td>
<td>9.6</td>
<td></td>
<td>3.60</td>
</tr>
<tr>
<td>Rental, Hiring and Real Estate Services</td>
<td>-15.1</td>
<td>40.9</td>
<td></td>
<td>2.60</td>
</tr>
<tr>
<td>Retail Trade</td>
<td>-0.5</td>
<td>7.8</td>
<td>+6</td>
<td>3.40</td>
</tr>
<tr>
<td>Transport, Postal and Warehousing</td>
<td>+2.8</td>
<td>17.7</td>
<td>-6</td>
<td>2.40</td>
</tr>
<tr>
<td>Wholesale Trade</td>
<td>-8.7</td>
<td>6.1</td>
<td>+108</td>
<td>3.40</td>
</tr>
</tbody></table>
<h2>3. How the industry credit-risk score is calculated</h2>
<p>Each ANZSIC division gets a single 1 (low) - 5 (high) score that blends a structural view with a current-conditions view, then maps to a level and a PD overlay. Step 1 - macro score: mean of five 1-5 components from ABS business indicators (employment, margin level, margin trend, inventory, demand). Step 2 - blend: industry_base_risk_score = 0.55 x classification_risk_score + 0.45 x macro_risk_score. Step 3 - map to a five-band ladder (Low / Moderate-low / Medium / Moderate-high / Elevated) and a PD multiplier (0.90x - 1.15x).</p>
<p>Worked example - Agriculture, Forestry and Fishing: classification 4.12, macro 4.20 -> 0.55 x 4.12 + 0.45 x 4.20 = 4.16 -> Elevated -> 1.15x PD overlay. These are point-in-time, illustrative overlays - not calibrated PD estimates.</p>
<p>Headline: 5 of 18 industries score Elevated (as of 2026-06-15).</p>
<p class="caption">Industry credit-risk scores (all ANZSIC divisions)</p>
<table>
<thead><tr>
<th>Industry</th>
<th>Classification</th>
<th>Macro</th>
<th>Base score</th>
<th>Level</th>
<th>PD overlay</th>
</tr></thead>
<tbody>
<tr>
<td>Agriculture, Forestry and Fishing</td>
<td>4.12</td>
<td>4.20</td>
<td>4.16</td>
<td>Elevated</td>
<td>1.15x</td>
</tr>
<tr>
<td>Mining</td>
<td>3.88</td>
<td>3.20</td>
<td>3.57</td>
<td>Elevated</td>
<td>1.15x</td>
</tr>
<tr>
<td>Manufacturing</td>
<td>3.50</td>
<td>3.40</td>
<td>3.46</td>
<td>Elevated</td>
<td>1.15x</td>
</tr>
<tr>
<td>Retail Trade</td>
<td>3.25</td>
<td>3.40</td>
<td>3.32</td>
<td>Elevated</td>
<td>1.15x</td>
</tr>
<tr>
<td>Wholesale Trade</td>
<td>3.12</td>
<td>3.40</td>
<td>3.25</td>
<td>Elevated</td>
<td>1.15x</td>
</tr>
<tr>
<td>Construction</td>
<td>2.75</td>
<td>3.20</td>
<td>2.95</td>
<td>Moderate-high</td>
<td>1.10x</td>
</tr>
<tr>
<td>Arts and Recreation Services</td>
<td>2.38</td>
<td>3.60</td>
<td>2.93</td>
<td>Moderate-high</td>
<td>1.10x</td>
</tr>
<tr>
<td>Accommodation and Food Services</td>
<td>2.75</td>
<td>2.60</td>
<td>2.68</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Public Administration and Safety</td>
<td>1.62</td>
<td>3.60</td>
<td>2.51</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Education and Training</td>
<td>1.75</td>
<td>3.40</td>
<td>2.49</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Rental, Hiring and Real Estate Services</td>
<td>2.38</td>
<td>2.60</td>
<td>2.48</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Transport, Postal and Warehousing</td>
<td>2.50</td>
<td>2.40</td>
<td>2.46</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Administrative and Support Services</td>
<td>2.12</td>
<td>2.80</td>
<td>2.43</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Information Media and Telecommunications</td>
<td>2.12</td>
<td>2.60</td>
<td>2.34</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Other Services</td>
<td>2.38</td>
<td>2.20</td>
<td>2.30</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Electricity, Gas, Water and Waste Services</td>
<td>2.25</td>
<td>2.00</td>
<td>2.14</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Health Care and Social Assistance</td>
<td>1.50</td>
<td>2.80</td>
<td>2.08</td>
<td>Medium</td>
<td>1.00x</td>
</tr>
<tr>
<td>Professional, Scientific and Technical Services</td>
<td>1.75</td>
<td>2.00</td>
<td>1.86</td>
<td>Moderate-low</td>
<td>0.95x</td>
</tr>
</tbody></table>
<footer>END OF REPORT</footer>
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