Unbelievable, from The Australian:
Reserve Bank governor Philip Lowe is understood to have met the big four bank chiefs in recent weeks to caution them against an overzealous tightening of credit supply in response to lending rules and the Hayne royal commission.
A key message conveyed was that, while prudent lending was the aspiration, the banks were in some instances turning away good loans or not taking enough risk to warrant even a small tick-up in arrears, senior sources at the big four banks said. The meetings were conducted separately with each bank.
The major lenders are walking a fine line, though, as they seek to meet responsible lending requirements and move away from controversial benchmarks such as the Household Expenditure Method to assess loan serviceability.
Well Holy Shit. We just returned to the bad old days of centralised credit standards fixing. Or, the corrupt RBA is trying its best to take us there.
The RBA’s independence from both government and the banks has now collapsed. It’s role is supposed to be to use the cash rate to meet its mandated obligations free of political considerations and most definitely free of bank contact. It is doing neither.
It is perhaps forgivable that that the RBA might cross the line and use its chairmanship of the CFR to involve itself in the lending standards governed by APRA, that separation is arbitrary and is one reason why an inquiry into regulator responsibility is needed. What is totally out of line is that it would do so to subvert the outcomes of the Hayne Royal Commission before we’ve even gotten the results. Here’s what Phil Lowe said himself about the Hayne RC:
Dr Lowe said the banking royal commission was “showing the benefit of sunlight” being shone on the internal workings of the banks.
“Sunlight is acting as a very good disinfectant here. We need this disinfectant, and it actually working,” Dr Lowe told a House of Representatives economic committee hearing.
“Like most Australians I have been following what’s been happening very carefully, and I have to say I’m incredibly disappointed and in many cases I’ve been appalled.”
Now he’s standing right behind the appalling behaviour which is…appalling!
As for free of government, we already know that the RBA is working hand-in-glove with Treasury and the Treasurer, who must be loving the benefits for the Coalition as the RBA isolates Labor’s housing affordability agenda.
Not to mention that the RBA’s public statement about monetary policy are no entirely irreconcilable with its wild private behaviour.
Phil Lowe should be sacked forthwith for gross violation of just about every tenet of his mandate.
Will the RBA’s ribald corruption campaign succeed? Nope:
- the Hayne RC does not deliver its outcome until February and before then bankers will be sticking with higher standards lest they go to prison;
- even if the Hayne RC is nobbled by the corrupt CFR, it will still result in new legislation that will have no time to be delivered before the federal election in May leaving bankers on tenterhooks;
- Labor will need to show a firm hand in response at minimum and we still have its negative gearing reforms coming anyway.
That takes us out to mid-2019 before we get any respite. By then Sydney will be down more than 15% and Melbourne more than 10% and the imploding internal dynamics of the market will have taken over as the economy buckles. Immigration is a long term support that can’t fix a cyclical crash.
The RBA will have to do then what it should be doing today. Instead of throwing its weight around like some monetary mobster, it will be forced to cut rates.
Finally, let me observe that Australia’s political-housing swamp is now so perverse that the government and RBA are publicly endorsing illegal, predatory mortgages, as well as actively targeting a decline in Australian living standards, while the chastened banks, legal system and ordinary people are on the side of morally and economically sustainable lending and economic growth.