Treasurer Josh Frydenberg plots way through ‘economic headwinds’

After meeting with the RBA governor, Josh Frydenberg praised APRA’s slated removal of interest rate hurdles.

Prime Minister Scott Morrison and Treasurer Josh Frydenberg meet with the RBA Governor Philip Lowe at the Reserve Bank of Australia in Sydney. Picture: AAP

Treasurer Josh Frydenberg met with Reserve Bank governor Philip Lowe today to discuss how Australia navigates “economic headwinds”, as he also praised the prudential regulator’s slated removal of interest rate hurdles for loan assessments.

After making his first formal business address since Saturday’s election win, Mr Frydenberg confirmed a meeting with the prudential regulator today and welcomed the announcement of relaxed interest rate hurdles and buffers for home loan serviceability assessments.

“It is a positive move. It has been well received,” he said at an annual stockbrokers’ industry conference in Sydney.

“That will continue to spur lending across the economy.”

The Australian Prudential Regulation Authority wants to remove an interest rate hurdle of 7 per cent that is baked into bank loan assessments, allowing lenders to set their own threshold. A buffer of 2 per cent will rise to 2.5 per cent under the APRA plan.

“The banks now have an opportunity to continue to provide the capital flows into the economy, that is their economic and social responsibility,” Mr Frydenberg said.

“But they are businesses and they have to do all the appropriate credit checks and make decisions that in the best interests of their business, but at the same time it important that credit continues to flow in the economy both to households and businesses.”

On the economy, Mr Frydenberg said both opportunities and challenges were discussed with Dr Lowe.

Josh Frydenberg speaking at the Annual Stockbrokers' conference in Sydney. Picture: Hollie Adams

“The Australian economy faces some headwinds,” he said, adding that trade tensions were escalating between the US and China and weighing on growth.

Mr Frydenberg said the drought and floods in Australia in recent months had also had a “significant impact” and made growth more difficult.

He said he stressed to Dr Lowe the government’s planned tax cuts and $100 billion in infrastructure spending that would help to buoy economic output.

“It’s the time for a pro-growth strategy.

“These are projects our country has been waiting half a century for,” Mr Frydenberg said of the pipeline of infrastructure projects including Snowy Hydro.

His comments follow a speech by Dr Lowe yesterday urging more stimulus in the economy including infrastructure projects, as he signalled an official interest rate cut was likely in June.

Mr Frydenberg said uncertainty in the banking market had led to some “risk aversion” on lending but that would subside following the end of the Hayne royal commission and the federal election.

“Now that the royal commission is over, now that the election is over and there was obviously uncertainty around the Labor Party’s high tax agenda … now that is all over we can get on with business.”