SYDNEY, May 8 (Reuters) - A majority of fixed income investors surveyed by Fitch Ratings ranked Australian housing market downturn as the top risk for local credit markets, a remarkable shift in sentiment from just a year ago though they were less gloomy about the jobs sector.
The survey, conducted between March 11 and March 25, represents views of managers of more than A$500 billion of fixed income assets who account for over three-quarters of Australia's real money market, Fitch said.
About 70 percent of those polled saw tumbling house prices as posing the "most serious threat" to Australian credit markets - which includes government and semi-government papers and residential mortgage-backed securities - over the next 12 months.
That compares with only 29 percent who had rated the slowdown as "high risk" a year ago.
The majority predicted further declines in homes prices this year though not one forecast the unemployment rate to edge above 6 percent over the next 12 months from 5 percent now, Fitch said.
The labour market gained particular significance after Australia's central bank signalled that future cuts in interest rates depended on employment improving after holding its policy rate at a record low 1.50 percent for a 30th straight meeting on Tuesday. said the resilience in the employment sector "should provide some support to the property market at a time when house prices are falling, considering the link between unemployment and mortgage defaults."
Australian home prices are on a downward spiral, slipping for consecutive months since late last year and were down more than 7 percent in April from a year ago.