Rate cut delay fear as many frozen out of loans: ANZ boss
Interest rate cuts may be delayed, says ANZ chief executive Shayne Elliott, who has warned lending controls remain too tight to allow average people to obtain home loans.
Interest rate cuts may be delayed until the first half of next year as the Reserve Bank waits to see the inflationary impact of imminent tax cuts, says ANZ chief executive Shayne Elliott.
Mr Elliott, in an interview in Brisbane with The Australian, said that tax cuts would be the equivalent of two rate cuts and would “put a lot of money into people’s pockets”.
Two 25 basis point rate cuts would equal $250 a month for a mortgage holder owing $600,000, while someone earning $100,000 a year will receive a $181 a month tax cut.
He also said a further hike in rates was not out of the question.
“I think the RBA may be looking at where people spend that tax cut money and the impact,” said Mr Elliott.
“Do they save it or spend it? We don’t know. So I wouldn’t be surprised if the rate cuts were in the first half.
“I don’t want to be a doomsayer but you can’t rule out that the next move will be an increase. It’s not a zero chance. It’s not the likely case but not impossible.”
He conceded his view was contrary to the ANZ’s own in-house expectations that the Reserve Bank will start to be cut rates later this year.
Of the big four banks, the Commonwealth Bank and Westpac share the same view as the historical analysis that rate cuts will begin in September.
ANZ and NAB on the other hand don’t see rate cuts kicking off until November.
Mr Elliott said he agreed with the leaders of other large banks that prudential lending requirements were too tight in Australia, potentially freezing out well meaning and hard working people from obtaining a home loan.
The bosses of NAB, Westpac and Commonwealth Bank earlier this week took aim at the state of the lending and banking landscape, saying the system was making borrowing more difficult and often more expensive to access.
“We have over-indexed to safety,” said Mr Elliott.
“To given an analogy, it's a bit like setting a speed limit of 5km/h. So we’ll all be really safe, but nothing will get done. That’s sort of what we’re doing with access to credit. I get it, we don’t want anybody to get hurt but what happens is all those people who wanted a home loan, who probably had good credit and would have paid it back, they can’t get a loan.”
He said prudential regulation was now excluding people from the aspiration to have a home or small business loan.
“That’s a sad thing and the price is high,” said Mr Elliott.
“All these regulations have been added on over the years with good intent but now it’s time to stand back and look at the whole thing. How do we get a bit more commonsense back into this? I’m not saying remove all controls but we probably need a review.”
He said loan defaults were still under 1 per cent because only the relatively well off can obtain loans. “I think banks have changed in terms of being a good barometer of the economy because access to credit, getting a home or small business loan, has never been harder for all sorts of regulatory reasons,” said Mr Elliot.
“So what that means is that the people that we see every day, who are borrowing from us, are generally well off because they’re the only people who have been able to get a home. So they’re actually doing okay.”
He said lending controls and regulations had been introduced cumulatively since the global financial crisis and a raft of inquiries into the banking sector.
“There have been hundreds of regulatory changes, and each one you can probably justify and rationalise, but cumulatively nobody’s really stood back and looked at the whole thing and gone, ‘hang on, this has come at a high cost, because a whole bunch of hard-working decent, honest people can’t get a home loan or credit card today as a result’.”
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‘I don’t want to be a doomsayer but you can’t rule out that the next move will be an increase’
Shayne Elliott, ANZ chief executive
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Mr Elliott said ANZ was on track to complete the $4.9bn acquisition of Brisbane-based Suncorp Bank by late July following the green light from the Australian Competition Tribunal.
“We’ve passed a big hurdle with the tribunal and that’s really a relief from our perspective,” he said. “It’s taken a lot longer than we had ever envisaged but now we’ve got a couple of more things to get through.
“In the meantime, the team is getting prepared for what we call day one. Day one is when we actually get the keys to the place. I’m going up after this to spend time with the Suncorp leadership team and they’re excited.”
His comments come as other bank leaders weigh in on the state of the Australian economy and what government needs to do prevent growth slowing.
CBA boss Matt Comyn on Tuesday issued a bold call for sweeping tax reforms, urging the government to drastically simplify income taxes, raise the GST, ban cash payments above a threshold and impose a levy on technology giants.
He argued that turning around Australia’s projected long-term growth slowdown required a focus on “growing the pie, international competitiveness dynamism, and supporting both the mobility of labour and capital across the economy”.
Meanwhile NAB chief executive Ross McEwan warned that the nation’s spiralling housing crisis could soon represent a broader hit to the economy but said curbing migration was not the solution.
“One of the biggest issues for me around housing is we just don’t have enough of it here in Australia,” Mr McEwan said.
“And that will slow down the growth of this economy because if you don’t have houses for migrants to come in to, we’ll soon be cutting off the migration levels coming into the countryside. So we’ve got to get the housing going so we can get more migration, of the right types, to help grow this economy – and that’ll keep Australia growing.
“If we don’t, well, I think Australia will slow down accordingly”.
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