Responsible lending laws choking credit, says former federal treasurer Peter Costello

Former federal treasurer Peter Costello says changes to responsible lending laws would stimulate the economy.

Former treasurer Peter Costello is chairman of Nine Entertainment. Picture: Gary Ramage

Former federal treasurer Peter Costello says Australia's monetary policy has probably run its course and believes some changes to responsible lending laws would stimulate the economy.

Mr Costello said there was “a lot of intervention” following the Hayne royal commission earlier this year, which may have “gone a little too far”.

Record low interest rates and tax cuts have failed to stimulate consumer spending, which has hit advertising spending.

READ MORE: Prioritise growth over surplus | QE coming next year, predicts JPMorgan economist | Silent killers stalking economic growth

“Once you've got a cash rate of 75bps, cutting by another 25 [basis point] is unlikely to change sentiment or behaviour much at all,” Mr Costello told journalists on the sidelines of Nine Entertainment's annual general meeting in Sydney. He is chairman of the media group, which issued a profit warning on Tuesday morning, citing difficult ad market conditions.

“That's even if you can pass it on into the real economy, and query whether you can; query whether you can pass full cuts now through to business lending or for that matter even on mortgages.”

Mr Costello said there are restrictions on business, “which if they were ameliorated would help”.

“I think the responsible lending laws are having the effect of choking credit a bit, and I notice the other day the Treasurer said exempt small business from the responsible lending laws.

“If you could put in place some measures like that, which would support the flow of credit again I think that would be positive for the economy,” Mr Costello said.