Less bang in interest rate cuts
INTEREST rate cuts are having a much weaker impact on home-loan borrowing than they have had in the past, bank bosses say.
INTEREST rate cuts are having a much weaker impact on home-loan borrowing than they have had in the past, bank bosses say.
Two Reserve Bank rate cuts since May have prompted only a small rise in lending because consumer confidence is down, Commonwealth Bank and Adelaide Bank mortgage executives Kathy Cummings and Damian Percy told a forum in Adelaide yesterday.
Reserve Bank assistant governor (financial markets) Guy Debelle, a fellow forum panellist, said the muted reaction was not surprising.
"We don't expect credit going back to the pace it was in the mid 2000s, or household spending going back to that pace,'' he said.
"Turnover in the housing market is about as low as it was 20 years ago.''
Mr Debelle said the rate reductions were instead helping households to pay down debt faster.
Ms Cummings said the recent cuts in interest rates had stimulated a ``slight upturn'' in lending activity.
"But consumer confidence is the malaise that's affecting Australia, even though if you go overseas you come back and wonder what everyone is worrying about,'' said Ms Cummings, CBA's executive general manager of third party banking.
People were worried about the threat of unemployment, she said.
Mr Percy said there had been "a bit of an uptick'' in lending but also noted the lack of consumer confidence.
"Post-GFC, whether it's a function of survivor's guilt I don't know, but Australians have changed their attitude to debt,'' he said.