‘Keep hands off housing market’, say bank CEOs

Commonwealth Bank and Westpac bosses argue against intervention to cool the housing boom, despite forecasting prices will grow by 10 per cent in 2021.

Commonwealth Bank CEO Matt Comyn in Canberra. Picture: AAP

The nation’s two biggest home lenders have argued strongly against any measures to curb the housing boom, despite predicting that prices will surge 10 per cent this year.

Commonwealth Bank chief executive Matt Comyn told the house economics committee on Thursday that the residential market was “very strong” in February and March, but April was likely to be a little weaker.

Even so, CBA had upgraded its forecast for price growth this year from 8 per cent to 10 per cent, with Westpac chief executive Peter King trumping that with a similar bullish prediction for next year.

“There is not a lot of turnover in the market and stock is very tight so houses are being well bid,” Mr King told the committee’s afternoon session.

The trajectory of the housing market is a huge turnaround from the peak of COVID-19, when CBA expected a 10 per cent slump.

Ultimately, prices only retreated 2 per cent.

Both CEOs said macroprudential intervention, or the introduction of speed bumps to rein in the boom, was unnecessary because conditions were very different to the last cycle.

Mr Comyn said riskier investor lending in 2015 accounted for about 60 per cent of applications compared to the current level of 24 per cent.

Also, prices were booming in select areas, unlike the broadbased recovery now under way.

“So we see this as much lower risk than in previous cycles,” Mr Comyn said.

Mr King said three categories of lending — high loan-to-valuation loans, interest-only and investor lending — were “much lower than we saw at the last peak, and up a little bit but not much on the last six to 12 months”.

The hearings on Thursday were interspersed with a further release of strong economic data.

The unemployment rate fell from 5.8 per cent to 5.6 per cent in March, as the economy added a further 70,000 jobs — more than double market expectations.

Josh Frydenberg said employment was up, as was participation and hours worked, with more people in work today than ever before. The labour market, he said, was recovering at 4½ times the rate in the 1990s recession.

“We saw very strong consumer and business confidence numbers earlier this week, with consumer confidence rising to an 11-year high, and this is another proof point of Australia’s economic ­recovery gaining momentum,” the Treasurer said.

Mr Comyn ­injected further optimism by ­saying the recovery in the labour market from the depths of COVID-19 had been “miraculous”.

This week, CBA upgraded its economic forecasts for GDP and employment, with unemployment now forecast to decline from 5.6 per cent to 5 per cent by the end of the year and to 4.7 per cent next year.

The pre-COVID figure in February last year was 5.1 per cent.

The economy this year was expected to grow by 4.4 per cent, and there was a big “tailwind” from $150bn in surplus savings that was expected to boost consumption.

Despite the end of JobKeeper in March, Mr Comyn said there was nothing in the data to give the bank cause for alarm about the outlook for business and investment.

“In the case of businesses, they are operating with something of a buffer and then they will use … an overdraft but we won’t see that for some months,” he said.

“While we expect to see some degradation in the coming months, there is nothing that is causing us concern.”

Questioned about any ­ambition to acquire Suncorp’s banking business, Mr Comyn declined to comment on “current or future mergers and acquisitions activity”.

However, he said Suncorp Bank was a “meaningful” business and any such move would be carefully examined by the competition watchdog.

Mr Comyn was more open about fintech deals, saying CBA would be open to opportunities if the technology was innovative and it introduced innovation to the market.

Pressed by Labor Party MP and deputy chairman Andrew Leigh, who described the bank as the “gorilla in the room”, he said he was unaware of any aspiration by CBA to acquire fintech companies so that it could quash ­competition.

On home-loan deferrals, Mr Comyn said repayments had been deferred on 158,000 loans at the peak of the pandemic; a figure that had fallen to only 3000-4000.

At Westpac, Mr King said 4500 mortgage customers were now in hardship, or unable to meet their previous repayments.

The value of mortgages on deferral had fallen from $55bn to $2bn.

On the cryptocurrency mania, which has seen the price of bitcoin surge to $US62,837, Mr Comyn said the role of digital currencies in payments and as a store of value was a priority area for CBA and “it should be for the parliament as well”.

There was “enormous” innovation and interest in the cryptocurrency sector.

While there were mixed views on the value of the product, the ­investment returns had been ­attractive.

Certain groups of people believed its performance as a store of value was superior, and the distributed ledger technology — or blockchain — that supported bitcoin could deliver a number of benefits.