‘Unshackled banks good for housing’, says Property Council

Housing groups have welcomed the Morrison government’s decision to simplify responsible lending obligations, declaring it will help more Australians to buy or invest in property.

Property Council of Australia chief executive Ken Morrison.

Housing groups say the Morrison government’s decision to simplify responsible lending obligations will allow more Australians to buy or invest in property while improving housing supply and affordability.

Property Council chief executive Ken Morrison said the simplification would ensure access to credit for Australians wanting to buy a home, invest in property or start a business and revitalise an economy reeling from the impacts of the coronavirus pandemic.

“A competitive and well-functioning credit market, subject to prudent regulatory oversight, will help more Australians buy or invest in property, improving housing supply and affordability and support jobs and economic growth,” he said.

Housing Institute of Australia chief economist Tim Reardon said the pursuit of a strong financial system had eliminated the flexibility in the mortgage market that had made home ownership achievable.

“It should be banks that determine the risk of lending money, not regulators,” he said.

But consumer groups warned that removing responsible lending laws would shift the banks’ responsibility to customers, while opening new opportunities for the financial sector to aggressively sell debt.

Financial Rights Legal Centre chief executive Karen Cox asked how the government could have so quickly forgotten the hard lessons of the global financial crisis and banking royal commission.

“The problem people are having right now is too much debt and not enough income,” she said. “The government’s solution is to take on more debt with fewer protections.”

In a major structural shake-up of the 2009 consumer credit protection laws passed by the Rudd government, about 100 pages of regulation will be torn up to help funnel billions of dollars of locked up credit back into the economy and ease the liability imposed on banks over so-called bad loans by shifting responsibility to the borrower.

Eliza Owen, head of research at CoreLogic, said that in theory ­removing barriers to credit would generally increase property values, whether that was through more relaxed borrowing terms or cheaper loans.

“In the current climate, a relaxation of lending conditions could have an inflationary impact on dwelling values, compounded by record-low lending rates, which the RBA have signalled may move lower still,” she said.

In his budget outlook on Friday Josh Frydenberg said the regulatory lending framework was not fit for purpose and had become overly prescriptive in the wake of the banking royal commission.

“We need our banks to be ­extending credit,” he said. “We need the regulation to be streamlined. We need customers to be able to access credit and we’ll have in place through APRA, Australian Prudential Regulation Authority, the appropriate risk based, principles based framework to protect customers.”

Business Council of Australia chief executive Jennifer Westacott said the changes got the “balance right” in protecting consumers and ensuring those that needed credit could receive it.

Opposition treasury spokesman Jim Chalmers said he wanted to ensure Australians already struggling were not caught in debt traps. “The government does have a bit of form, unfortunately, in going easy on the banks and the loan sharks at the expense of ordinary people so we’ll have a look at it.,” he said.