Jobs and the economy crimping borrowing, not red tape

Commissioner Kenneth Hayne and Treasurer Josh Frydenberg with the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, at Parliament House in Canberra. Picture: Kym Smith

Treasurer Josh Frydenberg’s attempts to stabilise the housing market would be applauded if they weren’t so hypocritically political.

Australia’s personal debt metrics are among the worst in the world, with household debt to income running at 200 per cent and mortgages to GDP at 100 per cent on UBS figures.

Into this market the treasurer is throwing out five years of lecturing the banks to stop behaving so badly to now tell them to throw caution to the wind and blow everything.

It’s not going to happen.

Credit growth in Australia is now running at close to zero and in case the Treasurer didn’t know, the banks would actually like to lend more money. That is how they make money.

Official interest rates at all time lows and yet people still don’t want to borrow.

It’s not the regulations or the banks’ overzealous caution that are the problems. It’s jobs and the economy.

Cutting regulation is always a great idea and the banks by now should know what the community expects of them into terms of responsible lending standards without needing red tape to support it.

But there are not a lot of banks around town turning away potential borrowers. Much to the banks’ chagrin, there are simply not many new borrowers out there.

Investment loans account for roughly one third of home loans but demand is weak in part because we are in the middle of the worst recession in a generation, house prices are falling and people can’t afford to pay rent because they don’t have a job.

Dating back to the Financial Systems Inquiry in 1997, banks have been told to lift their lending standards and only to lend money to people who can afford the debt.’

The Hayne Royal Commission delighted in showcasing banks behaving badly.

Now Treasurer Frydenberg wants us to forget all that and just throw money at anyone.

The Afterpay bulls say young people are rushing for their buy now pay later products because young people don’t want to be burdened by credit card debts.

Business thinks the immediate outlook is weak and so doesn’t want to borrow.

Cutting red tape at any time is good, but let us be realistic about the spin coming from the Treasurer and understand his latest measures will amount to zero.

The government has acted superbly in trying to boost the economy but as Frydenberg has said before it‘s all about jobs and a stable macroeconomic environment and until there is evidence that lending growth will remain weak.