At the bottom of the cycle credit is difficult to obtain. Banks want to ensure that their balance sheets are robust enough to withstand any potential run on funds. At the top of the cycle when asset prices have been skyrocketing banks will be giving away more money than borrowers want!
Well Josh just ensured that the 2nd half of the cycle like clockwork will occur.
On Friday Australia’s favourite treasurer Josh Frydenberg made sure our battered Aussie bank executives had a fantastic weekend when he announced the dumping of the decade-long and recently reinforced responsible lending requirements. This is music to the banks’ profits!
“This is not about the banks, it’s about the consumer,” Josh Frydenberg
Reserve Bank Governor Philip Lowe agreed saying a system where “if a borrower can’t repay the loan, it’s always the bank’s fault” was untenable.
Mike Felton Head of the Mortgage and Finance Association of Australia felt that “these changes will result in faster turnaround times for qualified borrowers removing onerous processes which should lower the cost of lending and borrowing money,”
Ken Morrison, chief executive, Property Council of Australia continued to show his independence when he contributed “A competitive and well-functioning credit market, subject to prudent regulatory oversight, will help more Australians buy or invest in property, improving housing supply and affordability and support jobs and economic growth”.
Its good to see that all the vested interests are now in unison and happy. ????
With the onset of the Government Open Banking regime coming into play what will be very interesting to watch will be the technology response. We can envisage that technology will become a key differentiator between lending institutions carving a wide cavern between those who have embraced technology and those still using paper-based applications.
The intention of all this is to stimulate the economy. To stimulate credit. But we all know it will stimulate asset prices.
The shift from “lender beware” to “borrower beware” is exactly what the Calnan Flack Economic Cycle Action Plan (ECAP) tells us to be on the lookout for.