Australian house prices are down 5% on James McIntyre's figures, and one Sydney apartment developer has already gone into administration because of it.
The usual reading of a builder failing is that a lender took a bad credit decision. McIntyre's point is that the lender this time was not a bank: residential developers in this cycle funded themselves in private credit, and it is private credit that now has to mark the collateral.
"I would hazard to say that bond yields are elevated everywhere. So this is going to not just be an Australian story."
McIntyre covers the Australian and New Zealand economies for Bloomberg Economics, so he is reading the Reserve Bank's next move and the damage from the last three hikes off the same set of numbers.
The full segment is covered here so you can skip it.
Here are the 5 takeaways that matter.
👤 Guest: James McIntyre, Bloomberg Economics' economist for Australia and New Zealand, speaking from Sydney
🎙️ Host: Doug Krisner, who anchors the Bloomberg Daybreak: Asia Edition podcast
👥 Also on: OCBC's Vasu Menon, in a separate segment of the same episode, in conversation with Bloomberg Television's Haidi Stroud-Watts
📰 Published: 13 September 2026 on YouTube (Bloomberg Podcasts)
🔴 YouTube | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ length not available
Key Takeaways
Central banks are being hit by an energy shock and an AI building boom at once
Markets repriced first, and McIntyre reads bond yields as the evidence
Australian mortgages are floating rate, so a hike reaches the economy almost immediately
Residential construction is the first sector to break, and one Sydney developer already has
The developers in this cycle borrowed from private credit rather than from banks
A loan-to-value covenant struck at 30 June does not survive today's bond yields
Some funds have already locked up to stop investors redeeming
He expects the Reserve Bank to look through September and possibly hike in November
1. Two Global Shocks
Doug Krisner opened with the week's calendar — the Federal Reserve on Wednesday, then the Bank of England and the Bank of Japan, Taiwan's central bank expected to tighten, and the Reserve Bank of Australia possibly raising by 25 basis points later in the month — and asked whether the consensus that central bankers are behind the curve is right.
McIntyre said markets do see it that way, and gave two reasons. Central banks, he said, are facing "two global shocks" at the same time.
The first is energy. Economies had expected a slowdown as the inflation from the 2022 and 2023 invasion of Ukraine worked through the system. "But here we are. We've got this renewed energy inflation shock from the conflict with Iran."
The second is capital spending on AI: "And then overlaid behind all of that is the growing realisation and the growing physical impacts of the AI investment boom that's hitting everyone."
"Down here in Australia, we've got a major capital investment program underway, and that's the case that's hitting many places around the world."
"So you've got central bankers having to pivot, and pivot quickly. Markets have pivoted well before them, and that's what bond yields are suggesting."
The questions he says policymakers are now asking themselves are "What here is permanent? What here is a transitory shock? And do we have the luxury of waiting?" — and "And I think markets view right now is that there's a little less of that luxury than many of us would prefer."
2. Bathla's Perfect Storm
Krisner asked about what he called the unintended consequences of higher rates in Australia, and specifically the collapse of a property developer in the past week.
"So in Australia, we've had three rate hikes this year." Rates are high relative to recent years, and especially relative to the post-pandemic period.
The transmission is unusually fast: "In Australia, mortgages are generally floating rate. And so that means that the monetary policy instrument does have a big rapid effect and pass through into the economy."
"And the most interest rate sensitive sector of the economy is the residential construction sector." He said that sector has been under pressure, with the strain now showing up as "cracks or failures of businesses."
The named casualty is Bathla: "And one of them was a developer, a predominantly Sydney-based group called Bathla, and they specialised in low to mid-range cost or a more affordable end of the market and apartments."
Three things hit at once, on his account. The rate shock; consumer uncertainty from the Iran conflict and the fuel-price hit that came with it; and then, in his phrase, "another bogey entered" — government taxation changes.
Investors stopped buying apartments and the housing market turned down. "We've had a 5% decline so far, probably some more still to go, and a bit of a bigger decline in Sydney in prices."
"So all of a sudden you have these developers sitting there, rising construction costs, rising costs of debt for the stock that they're holding, buyers running in the other direction, and the product that they're trying to sell, finished apartments, falling in price as well."
The part that makes it a market story rather than a builder's story is who lent the money: "The residential developers this time around in this cycle have sourced a lot of their funding, not from banks where they traditionally tended to source it from, but from the private credit sector."
3. The RBA's Two Problems
Krisner asked whether any of this changes the thinking at the Reserve Bank, or whether it is too soon to know.
"This is the challenge. The RBA is a dual mandate central bank, and they have been incredibly concerned about what's happening with inflation." He described it as "very, very concerned about the demand remaining strong" in the economy, with inflation higher than they want for longer than they want, and fuel prices encouraging consumers to expect more of it.
Against that sits the property downturn, which has a second effect beyond the failed developer. "The downturn, it's had this casualty, but it's having another casualty as well in terms of the wealth effect, a negative wealth effect, perhaps helping consumers or encouraging consumers to keep their wallets shut."
The tension does not resolve in the consumer's favor, because the data-center build-out keeps demand up: the weakness in household spending, he said, is being "overrun by the demand piece in the economy from the data center boom."
The result is that market pricing has moved. If the Reserve Bank does not hike in September, he said, the expectation shifts to a hike in November.
4. The September Call
Asked directly for his base case for the September meeting, McIntyre gave one and then qualified it.
"Well, our base case is that the RBA looks through in September."
The qualification is fuel, and it had moved that morning: "But I was just looking through some of the data this morning. Fuel prices are looking like they're going to be increasingly moving higher based on what we're seeing at the refinery level in Asia and in Singapore with those benchmark prices for fuel products there at the wholesale level. So that's straining my base case a little bit."
His reason for holding fire is the calendar of data rather than the state of the economy: waiting buys the bank another monthly reading and, more importantly, the big quarterly inflation print, which lands ahead of the November meeting.
That sets up November as the live meeting, depending on what the inflation reading delivers.
5. Private Credit Repriced
Krisner's last question was whether Australians are now discussing systemic risk, and whether the exposure sits in shadow banking rather than in the ordinary banking industry.
"I think this is going to be a problem not just within Australia, but everywhere as a result of where bond yields are. Bond yields are repricing assets all across the economy."
The mechanism is the discount rate applied to commercial property and to developers' land banks. The cap rate now in use means "the value of those assets right now is not what it was when books might have been ruled off at 30 June" — the Australian fiscal year end.
That is what breaks the loan documents. A fund wrote a loan-to-value covenant against a valuation; mark the same asset to today's bond yields, he said, and "that loan-to-value might be out of range."
The consequences run in both directions. "Some of the funds have had to lock up to prevent investors from redeeming their funds," and the next dollar going out to fund a project gets extra scrutiny.
This, he said, is the financial market starting to "impose that discipline from high bond yields" onto activity in the real economy.
Bathla is not the end of it. "And I would hazard to say that bond yields are elevated everywhere. So this is going to not just be an Australian story." For Australia specifically, he expects it to be "putting the brakes on" a lot of economic activity.
His summary of the whole process is an old market line: "the cure for high bond yields is high bond yields, so to speak." He expects it to keep running over the next couple of months.
Bonus Insights
Krisner's setup carried the numbers the segment was built on: the case for a US rate hike strengthened on Friday by a hot core consumer-price reading, and a spike in Treasury yields across the curve in which "the 10-year came very close to 5%."
He also flagged the diary beyond the central bank decisions: Reserve Bank Governor Michelle Bullock appears before Parliament at the end of the week.
McIntyre's fuel evidence is wholesale rather than retail. He is watching refinery-level and Singapore benchmark prices for fuel products, which is the input to what Australian drivers pay later.
McIntyre's bottom line is that the Australian developer failure is a credit-market event rather than a housing one: bond yields have repriced the collateral behind loans that private-credit funds wrote at older valuations, the covenants no longer fit, and because yields are high everywhere the same squeeze is coming for lenders outside Australia.
Products, Companies & Tools Mentioned
Bathla (The predominantly Sydney-based apartment developer that went into administration; his worked example of a business funded by private credit rather than by a bank)
Reserve Bank of Australia (The dual-mandate central bank at the center of the segment; three hikes this year, and market pricing now split between September and November)
Bloomberg Economics (McIntyre's team, and the source of the base case that the Reserve Bank looks through September)
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