Will The Empty Chair block Frydenprime?

Via the ABC:

“Flabbergasted.” That’s the universal response I’ve been hearing from consumer rights advocates to the Federal Government’s proposed abolition of the responsible lending obligations.

They simply can’t understand what the Government is aiming to achieve by freeing banks from their legal obligation to check whether potential borrowers can afford to repay a loan before they are granted it.

Other than a free kick for the banks.

“As we learnt to our cost during the GFC, weaker lending standards mean people will be loaded up with as much debt as possible. There is significant profit to be made in pushing borrowers to the edge,” said Financial Counselling Australia’s Fiona Guthrie.

Guthrie’s organisation helps thousands of Australians every year to pick up the pieces of their financially shattered lives, often after being approved for loans or credit cards they could never hope to afford.

The part of the law that the Government proposes to excise was written a bit over a decade ago to prevent exactly that.

Put simply, it requires lenders to check how much a potential borrower is earning and how much they’re spending and whether there’s enough left over to make their repayments without “substantial hardship”.

‘A solution in search of a problem’

Except that, since being legislated in 2009 it had never really been enforced, at least not against the mainstream lenders. At least until March 1, 2017.

That’s when the corporate regulator ASIC launched a test case against Westpac, alleging that its widespread practice of using a blanket — and many argue low-ball — living expenses benchmark for hundreds of thousands of home loan approvals didn’t cut the mustard.

But the Government isn’t changing the law because Westpac lost.

The bank not only won its initial case, but also an appeal to the full bench of the Federal Court. It could continue using its benchmark, and ASIC opted not to appeal to the High Court.

(Today, perhaps, we found out why. After all, why bother appealing to clarify a law you found out was going to be soon abolished anyway.)

As the Consumer Action Law Centre observed, the Government’s proposed changes to the National Consumer Credit Protection Act are “a solution in search of a problem”.

Treasurer Josh Frydenberg said the changes are designed to “increase the flow of credit to households and businesses”.

But it’s far from apparent that there’s any problem with the flow of credit at the moment.

“The Commonwealth Bank recently said that the flow of credit is above pre-COVID levels and that lending is growing at a strong pace,” noted the Consumer Action Law Centre’s CEO Gerard Brody.

“And none of the big banks opposed the responsible lending laws at the recent House of Representatives Economics Committee hearings.”

CALC and other consumer rights groups also point out that, under the National Credit Act, the responsible lending obligations do not apply to small businesses, a point ASIC also recently made.

To support his case, the Treasurer cited recent testimony from the Reserve Bank governor Philip Lowe at a parliamentary hearing.

“The pendulum has probably swung a bit too far to blaming the bank if a loan goes bad because the bank didn’t understand the customer,” Dr Lowe said.

It is, however, very uncertain that the RBA governor’s solution to the pendulum swinging “a bit too far” would be to hack it off altogether.

Indeed, while noting that credit growth to households was slowing, minutes from the RBA’s most recent meeting didn’t attribute that to any difficulties in getting loan approval.

“This largely reflected reduced demand from borrowers, given the weak and uncertain economic environment and its effect on the housing market,” the board observed.

Hayne train derailed

Moreover, Josh Frydenberg’s own department doesn’t, or at least didn’t in 2018, buy into the argument that responsible lending obligations hurt the economy.

Who was quoting Treasury? Banking royal commissioner Kenneth Hayne, in his final report.

In fact, in its submission in response to Mr Hayne’s interim report, Treasury said not giving loans to people who probably couldn’t afford them was likely to be good for the economy.

“Appropriately managed, ensuring the industry consistently meets the requirements of existing laws will likely enhance rather than detract from macroeconomic performance.”

Testifying before Mr Hayne’s commission, CBA boss Matt Comyn also expressed few concerns about the responsible lending laws, saying his bank was working hard to reduce its reliance on the Household Expenditure Measure – the HEM benchmark that had landed Westpac in court with ASIC.

‘Apply the law as it stands’

In its press release welcoming the announcement, the Australian Banker’s Association made the Orwellian claim that:

“The banking royal commission identified the need to simplify the regulatory landscape. This proposed reform removes duplication and overlap between regulators while continuing to ensure strong protections for consumers.”

But Mr Hayne’s recommendation about what to do with the responsible lending obligations was simple.

Because the ASIC v Westpac case was still running at the time, it wasn’t entirely clear where the law stood and Mr Hayne — a former High Court judge — didn’t want to pre-empt the Federal Court’s decision.

However, he basically said in his final report that if ASIC lost then legislators should consider changing the law — but to tighten the obligations on banks, not loosen them.

“If the court processes were to reveal some deficiency in the law’s requirements to make reasonable inquiries about, and verify, the consumer’s financial situation, amending legislation to fill in that gap should be enacted as soon as reasonably practicable.”

Mr Hayne’s recommendation is strengthened by the fact that artificial intelligence technologies combined with open banking rules that let customers authorise the sharing of their financial data between institutions now make it easier than ever for banks to quickly and cheaply automatically check and verify their customers’ financial positions.

What will the changes mean?

There’s no doubt the removal of responsible lending obligations should make it easier to get a loan in the short term, once it comes into effect in March 2021, if passed by Parliament.

You might think that will make it easier for first home buyers to buy a house, but that won’t necessarily be the case.

To use a personal example, we bought our home in 2018, just after the royal commission hearings and while ASIC’s Westpac loan case was still in court.

It was when banks were demanding a lot more detail about your income and, particularly, expenses. It took a few hours of going through pay slips, bank and credit card statements to get the information together.

The trade-off was that, as people with relatively steady jobs and reasonable savings, we ultimately had few problems getting a loan approval but some other people, including some property investors, obviously did.

The number of people at open homes dropped dramatically and, as a result, prices were falling.

Any move to relax lending restrictions will have the opposite effect.

While it will be easier for you to get a loan, it will also be easier for a lot of other people to borrow more money.

More competition and bigger loans equals higher home prices. That means even if you end up winning at auction, you’ll likely be left with a larger debt and higher interest repayments.

Which leads us to the broader economic problem.

Australian households are already the second most indebted in the world after the Swiss.

If these changes, as the Treasurer says, make it easier to borrow and increase the flow of loans they may temporarily boost economic growth but will do so by increasing household debt even further.

Ultimately, all that does is set Australia up for a future financial crisis and recession.

And, if that does happen, the banks will be in deep financial trouble.

That’s OK for them, because they have both an explicit Government guarantee on deposits and an unwritten guarantee that at least the big four will be bailed out by the taxpayer if they look like falling over (that’s something factored in to the credit ratings of the major banks by all the major global agencies, who peg the big banks’ ratings to that of the Australian Government).

But it does mean a future Federal Government — and us as taxpayers — might have to pick up the tab for bank failures, possibly while still paying off the cost of coronavirus.

It’s a case of personal responsibility but community liability.

So, while it might be a nice intellectual argument to say borrowers should be more responsible for how much debt they take on, unless we remove those bank guarantees, there’s a strong argument that the public, through the nation’s laws, should have some say in how banks are handing out loans.

Here is the NUMBER ONE recommendation of the Hayne Royal Commission:

That is precisely what Frydenprime is proposing to do.

So, this maniacal policy idea:

  • trashes Labor’s Hayne Royal Commission legacy;
  • trashes Labor’s responsible lending laws;
  • intrinsically ravages the core Labor constituencies of youth and working classes, and
  • is a clearly corrupt endeavour to restore Coalition mates in blood-sucking banks to criminal lending.

Yet I have no idea how The Empty Chair is going to respond. All we got over the weekend was dishwater from Shadow Treasurer Jim Chalmers:

“We want to see households and businesses get sufficient access to finance but we don’t want consumers caught in debt traps or the balance tipped back in favour of shonky lenders,” Dr Chalmers said. “The government has form when it comes to going easy on the banks and loan sharks.”

Labor said Commissioner Kenneth Hayne’s first recommendation in the final banking royal commission report said the government should not amend the National Consumer Credit Protection Act’s obligation to assess unsuitability.

Dr Chalmers said Labor would examine the proposed legislation closely before deciding whether to support it.

Greens senator Nick McKim said the Greens would look for support in the Senate to stop the changes getting through.”The day after Westpac received the largest corporate penalty in Australian history, the government is changing the rules to benefit the banks,” he said. “Looser lending standards will result in higher profits, higher dividends, and more money flowing into the most overpriced housing in the world.

“This is not the pathway to recovery.”

No, it is not. Yet the fire in Labor appears to have gone entirely out as it “small targets” itself into oblivion.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. The Empty Chair made me a citizen, back in 2004 in Ashfield Park, a day after the Federal elections that handed the Rodent the control of both houses.
    I didn’t know/care much about the Empty Chair before the ceremony, but he struck me then as total fvckwit.
    While I expected he would give a speech appropriate for the occasion, he instead delivered a totally partisan speech, lamenting the electoral obliteration and promising that ALP would bounce back stronger.
    I guess the tacit assumption was that every new citizen is an ALP voter by default.

  2. And what does the ALP have to counter this with?

    1. Dr Chalmers, the apparatchik’s apparatchik – rocketed to the Grattan Institute from Krypton after a life of student politics. With a newly minted PhD in paper bag making and zero life experience – parachuted into the shadow treasury to inspire confidence that all is well;

    2. Albo ‘The Albatros’ who worked in a bank for 10 minutes before taking up a life of politics and neoliberalism. Carries a political defibrillator with him where ever he goes;

    3. Penny Wong as our Foreign Policy wonk. Cantonese speaking, Malaysian born hence zero brownie points with our Han lords and masters of the CCP;

    4. Katy Gallagher and Teri Butler who’s smug identity politics and sneering superiority and hatred of working class values makes them the fart in the labour movement elevator and electoral cyanide. Less linkable than Shaoquett Moselmane mansplaining in a bikini;

    5. A coterie of has beens, might have beens, would have beens and baked beans on burned political toast.

    Jesus wept.

    • There is no opposition any more. They don’t care. Labor and Greens are not even trying. They all own RE. Depressing.

      • happy valleyMEMBER

        Absolutely and particularly, since Labor were the ones calling often and loud enough for the Banking Royal Commission in the first place. Labor and the Greens pollies have all basically retired to a very cushy life in parliament. It’s only a matter of time now before one of the big 4 goes down under the weight of its irresponsible lending which let’s face it only stopped for a brief time after the findings of the Royal Commission were handed down.

      • FUDINTHENUDMEMBER

        Reckon anyone with backbone has now they’ve given up. When we voted Scummo and co. in they realized what the average Aussie really wants. And that is house prices to the moon, screw all else.

        • Totes BeWokeMEMBER

          Absolutely 100% incorrect.

          Young Australians outnumber boomer voters.

          https://images.app.goo.gl/EZgWKRizy8ao6RjG9

          Young voters, vote Labor, erroneously thinking Labor act in their interests.

          Labor are the problem. Not pro housing voters.

          Those who didn’t vote Labor, did so knowing Labor are as bad as LNP but are EVEN worse when it comes to immigration.

          NG = 10% price increase.

          Immigration = 50%.

          • Count a Renters Party targeting 18-40yr with an uncompromising position on housing and wage growth move the overton window?

            Any MP resisting the abolishment of negative gearing will be called out for leaving in place an incentive for people to invest in an unproductive asset at the exact point in time we have massive unemployment and the need for productive investments could not be greater.

          • Totes BeWokeMEMBER

            Along with home ownership.

            Labor have to be broken before anything can happen IMO. Labor turning big Australia is the core of all our problems.

          • PaperRooDogMEMBER

            Yes, I’m thinking maybe we should just go all in property, especially since it’ll be the only sector looked after in any financial crisis

    • It’s still early, but it’s gold to Clive, go you good thing. I usually say “paper dolls” not “paper bags”.

    • Empty chair, whilst apt, is not explicit enough – prefer Albodross.

      Dim Chalmers! Mercy.

      I cannot stand Teri Butler’s sneering identity politics.

      Where’s Clare O’Neil – I often think she seems half sensible.

      THIS IS BULLTISH!

  3. So where the hell is labor on this. Thats right they are no where.
    What a pathetic no opposition bunch of losers they have become.
    They dont even try to be an opposition anymore.
    Seems like they are content to sit out the rest of their miserable lives in opposition in Parliament till they retire on a fat taxpayer pension.

    • Totes BeWokeMEMBER

      Labor misunderstand why they lost the election because that’s what big business want them to understand. They are naive fools.

      Australians desperately want change away from a corporate driven, unfolding environmental and social disaster.

      Labor have to go asap.

    • happy valleyMEMBER

      And their legacy will have been to leave us with a benevolent dictatorship after the last election and a full one after the next election?

  4. At their secret monthly meeting, Morrison and Albanese agree on a tiny list of topics, where the latter is allowed to pretend to oppose. This one didn’t make the list. Instead, Labor will “examine the legislation closely”. Bravo.

  5. happy valleyMEMBER

    “That’s when the corporate regulator ASIC launched a test case against Westpac …”

    No one seriously could have expected ASIC to win the case? They are basically useless – always have been, always will be? Ditto APRA and the RBA.

  6. Totes BeWokeMEMBER

    https://www.theage.com.au/business/the-economy/budget-warning-more-rent-seeking-won-t-create-jobs-and-growth-20200927-p55zna.html

    Such an excellent article.

    …”So the greatest crime of the rationalists (including, until far too late, yours truly) was naivety. They saw reforms that worked well in theory and assumed they’d work just as well in practice”…Ross Gittens admitting naivety.

    Labor are either astoundingly naive or they are as corrupt and immoral as LNP.

    Australia cannot survive with Labor as our best defence against LNP and big business. It’s time to do something about it, or we’re going to lose our country.

    • Display NameMEMBER

      Relax. Another lost decade coming up. There is likely to be no real political reform in Australia until a major economic reset. Then instead of discussions about how the pie will be sliced we talk about survival. And may, just maybe that will be a time for sensible policy in the interests of the average tax payer. I think we need more of a Nordic model. A coalition of many groups. Makes it much harder for the vested interests to buy a majority out. Currently it is far too easy,

      • Totes BeWokeMEMBER

        By then we’ll have another few million people all voting for immigration. All voting for the opportunity they came for.

        We do it now or it’s over. We’re losing Australia for good.

        • Actually you’d be surprised how many ‘older’ migrants don’t want the place turning into the country they came from, quote, unquote!

    • happy valleyMEMBER

      “Labor are either astoundingly naive or they are as corrupt and immoral as LNP.”
      It has to be the former (and after the last election, the are even scared of their own shadow) – no party could be as corrupt and immoral as the current LNP?

  7. Totes BeWokeMEMBER

    If Greens could agree on a given far lower number of CONTROLLED immigration AND RATIO, they could be Australia’s better option than weak dumb naive Labor. Short of a party that’s actually there in the interests of Australians.

    “Australia cannot survive with Labor as our best defence against LNP and big business”….that would be my slogan for a new party.

    • The Greens used to have a very good immigration and population policy based on the carrying capacity of the country.
      For some reason that now escapes me they ditched it in the 1990’s.
      All I will say is that Adam Bandt is not Richard Di Natali

    • I watched insiders on The abc on the weekend. When spears the host interviewed the badnt green guy, it was woke v woke. Little men………

  8. If Labor were smart (and that is a big if) – the Coalition have just given then a great opportunity to starve the them of the key element to keep the Ponzi going – that is oodles of debt. If done well, the economy will run out of puff pretty quickly and kill the idea of the Coalition being “great economic managers” and reveal them for what they are.

    Everyone knows the damage the GFC did and pitching these changes as creating the next GFC & being against it will almost certainly be a winner. Especially after banks have covered themselves in glory with the Royal Commision/other disgraceful actions.

    If they stuff this up and allow the law to go ahead they fully deserve the opposition for the next 10 years.

    • Totes BeWokeMEMBER

      If Labor stuff this up, they should lose the remnant support of anyone with a job.

      It’s time for Australia to admit what Labor now are.

  9. I was checking @AlboMP ‘s feed on Saturday to see when they were going to say something about it. I figured they would have a relaxing weekend and then say something on Monday.

    “Dr Chalmers said Labor would examine the proposed legislation closely before deciding whether to support it”

    That’s it. We have no effective opposition. He may as well be laying a red carpet out for Mr Morrison to walk on.

    I don’t care if it’s the Bullshit Party, or an independent, or any of the 20+ other parties, there is a big vacant space for someone to say what needs to be said.

      • This bit was good:

        “The economists’ greatest naivety has been their assumption that successive governments would faithfully implement their reform plans while resisting the temptation to do favours for generous mates.”

        We can bang on about policy – but it ain’t the game.

        • Totes BeWokeMEMBER

          Yep. Before massive immigration it didn’t hurt too much. Only so much greed was possible and only so much damage was unleashed onto the electorate.

          Now with 400k annual immigration, it’s destroying every little crevice of our lives, and will continue to do so until we’re 3rd world, along with a handful of elites.

        • Good link L, have subscribed.

          The words coming from Labor are an accurate reflection of what their thinking is.

          Hence, zero urgency on the need to maintain responsible lending laws.

    • I don’t care if it’s the Bullshit Party, or an independent, or any of the 20+ other parties, there is a big vacant space for someone to say what needs to be said.

      The issue is not saying what needs to be said, the issue is being heard.

      • RobotSenseiMEMBER

        I’m personally going to stand on main roads in peak hour with a sandwich board, asking everyone if they’re enjoying their morning commute in gridlock.

        • Great idea. Sustainable Australia is the only party (I think) that advocates for moderated immigration. Imagine the effectiveness of overhead billboards straddling gridlocked roads and packed train carriages with the message
          “Do you vote Labor, Liberal or Greens? You vote for this”. Picture: gridlock etc.
          “vote Sustainable etc”

      • Totes BeWokeMEMBER

        What needs to be said (or heard) that Labor and Greens can’t say with tens of millions in advertising, a grassroots following, and the ability to call a press conference any time they want?

        You are full of it.

      • Good point, but I disagree.

        I believe any party who accepts the status quo of having to wait their turn to be heard by the MSM is voluntarily shooting themselves in the foot.

        From my experience, for $100 per week you can have exposure to everyone in your electorate who are 18+ on Facebook (maximise for reach 1 impression limit per person). Point is exposure is cheap. What you choose to do with that exposure is a different matter.

        • I believe any party who accepts the status quo of having to wait their turn to be heard by the MSM is voluntarily shooting themselves in the foot.

          From my experience, for $100 per week you can have exposure to everyone in your electorate who are 18 on Facebook (maximise for reach 1 impression limit per person). Point is exposure is cheap. What you choose to do with that exposure is a different matter.

          “Exposure” without “credibility” is pointless at best, damaging at worst.

          The mainstream media outlets control the narrative. In particular, the “high trust” and “credible” sources like the Australian, Fin Review and ABC. They are who decides what issues are discussed (or not),m the context in which they are discussed and how the people discussing it are perceived.

          The last holdout of vague independence there was the ABC, which has over the last ~20 years – and particular the last ~2 – been thoroughly compromised by successive Coalition Governments.

          Facebook ads, Tiktok videos, whatever, do not set the narrative (or at least there is little to no evidence they do, in this country). In no small part because the feedback bubbles they create mean any messaging is either preaching to the choir (high credibility), or trying to convert the heathens (zero credibility).

    • Jumping jack flash

      “Other than a free kick for the banks”
      Says it all really. Libs, the bank whisperers. They’ll get you the debt you need.

      In the New Economy Labor is irrelevant. At least they know to get out of the way.

  10. The most appropriate sentence from the above comments?

    “Labor and the Greens pollies have all basically retired to a very cushy life in parliament.”

    But it’s not only Labor and the Greens pollies – it’s all of them!
    Politics isn’t a Calling; it’s a job, as noted in the article re Shadow Treasurer Jim Chalmers.
    It’s not about “Advancing Australia!” anymore – if it ever was – it’s about keeping one’s job. And if a few of your underlings have to get the chop and go and work as Real Estate Agents once every 4 years, so be it.
    It’s about those who’ve clawed their way to the top levels of Parliament ( and the Public Service), and their salaries and jobs – nothing more.

    • Display NameMEMBER

      And it should not be a career either. We need more politicians that have life experience in real jobs. And have a real job to go back to after politics. Not Lobyyist or ThinkTank “influencer” or mates sinecure as most currently do.

    • happy valleyMEMBER

      Yep – crawled up the greasy pole of moral bankruptcy and brown nosing. And they barely have to front up to Canberra now that we have ScoVID-19. So, for all of them it’s collect a min $200k pa for waking up each day and then it’s whatever else comes their way otherwise.

  11. You could see the example of this “i know what’s best” financial stupidity last night on Seven that the LNP want to encourage in the workers.

    They had some sort of after the crash program on, with a panel of experts. They’d cut away to a story and come back and talk about it. First story, a working poor couple (think they had kids, but never shown) renting with arse out of their pants, both lost their lower end jobs. Instead of immediately going on jobseeker, they pulled their super and lived on that because we’ll get jobs and god forbid we get the dole. Of course, they didn’t get jobs and only after their super was gone did they realise how damaging that mindset was.

      • Totes BeWokeMEMBER

        I can actually see that as a useful stunt. A fake guillotine with Labor’s name written on it.

        How about tshirts with images of Labor politicians in the stocks?

    • 1. Sue the ALP for calling itself a ‘labour’ party and false advertising;

      2. Sue Qantas for misleadingly appropriating the ‘Spirit of Australia’ and Australian identity;

      3. Begin a movement for unions to break away from the ALP (Australian Labor Party) and register the Australian Labour Party (ALP) or the Real Australian Labour Party.

      4. Begin a movement to support independents in electorates – irrespective of their politics.

  12. Jumping jack flash

    “people will be loaded up with as much debt as possible”

    Check.

    “But it’s far from apparent that there’s any problem with the flow of credit at the moment.”

    Its the rate of growth. This is completely inadequate to avert collapse. What does this guy think all those interest rate cuts over the last 20 years were for?

    “We want to see households and businesses get sufficient access to finance but we don’t want consumers caught in debt traps”

    About 10 years too late. Maybe more.

    Whats the alternative? Start admitting that the last 20 years were completely and utterly wrong, and the government sold out their people by perpetuating the lie about government debt, and this is the recession we had to have as a result? Not going to happen.

    Let it rip. Let this debt-ball economy go down in flames like the bloated Hindenburg of debt it is, with Joshy boy at the helm. “Look mum, i can drive an e-con-om-y!”

    • Mike Herman TroutMEMBER

      Jack you have been posting about the thrust of this policy for a while now if I remember correctly. Not the specifics, nor agreeing with it but how the government will attempt to get more borrowers to take on more debt…and here it is…

  13. Personally for me, this is it. I will be putting myself forward for the slaughter – I can no longer wait on the sidelines to buy a house.
    With no decent but affordable homes in Sydney’s north west, I will be taking on nearly $1m in debt to put a roof over my growing family. I know I can’t afford it. But it’s what the government wants and is permitting. The banks seem keen enough to extend and pretend when the loans go bad anyway. This sick bear is throwing the towel in.

    • Jumping jack flash

      This.
      Same. But not 1m. Fortunately that much isn’t required where i am.
      It really hurts to read that this much debt is absolutely essential for some people. The banks have so much to answer for.

      • Totes BeWokeMEMBER

        The banks have nothing to answer for. They’re a business and the executive have a responsibility to maximise profits. Not provide a house for you or me, or any other benevolent endeavour.

        Our problem is what the banks are ALLOWED to do, and LNP and Labor’s willingness to provide new fodder via immigration.

        • Jumping jack flash

          Yes its a bit chicken and egg in the New Economy. There’s also the matter of Free Markets and government jurisdiction. Its certainly not black and white. Less so after the government lost their skin in the banking game.

          • Totes BeWokeMEMBER

            Government are there to govern for the common good of the country.

            That, that is clearly not happening should have led to revolution over a decade ago.

          • Jumping jack flash

            In a perfect world, yes, but in the New Economy the governments work for the banks.
            Everyone is enslaved by enormous piles of debt that are absolutely essential to possess, and therefore have no time to revolt.

            A revolution is certainly required. Burn the banks.

  14. I don’t understand the problem. If people want a loan why not just give it to them? House ownership shouldn’t be reserved just for the rich. If they can’t pay the loan, the house goes back to the bank

    • Jumping jack flash

      Exactly.
      There is no risk at all if the debt grows at the correct rate.
      And for that to happen the right numbers of people need to be eligible for the correctly sized amounts of debt to make it all work.

      Joshy is just trying to make more people eligible for the huge piles of debt that are required now

    • /facepalm

      Please, nobody bother to attempt an explanation here. You’d be wasting precious keystrokes.

  15. There was no problem getting credit from the banks before or after the royal commission and there will be no problem getting credit before or after the lifting of “restrictions”.
    Any issues one might have now getting a loan is simply self imposed by the banks.
    The banks right now can lend as much as they want.
    Caps on LTI are self imposed by the banks themselves.
    6x income is deemed in sever stress. Most Banks caps are 7-9x. They can go high if they want to.
    In Australia 30% of the value of all loans are at greater the 6x LTI.
    Much higher in Sydney and Melbourne

    • Display NameMEMBER

      And nowhere else in the OECD are multiples close to Australia.
      And nowhere else in the OECD are banks loan books even close to 65% resi mortgages (Big 4). Norway closest at 42%

  16. Gosh, all these years I have been getting it all wrong.

    I thought that for each family in Australia to get a decent house we would need one house per family.
    I thought to create a house we would need:
    * building materials
    * workers to put the materials together
    * land
    * permission from govt to build on this land
    * associated infrastructure such as utilities, roads, rail, schools, hospitals, shops etc

    Now it turns out that all that is needed is sufficient access to finance.

    • Jumping jack flash

      Its not very difficult to work out how the New Economy works.
      When money is no object, its amazing how high prices can get, and how many properties a single person can acquire.

      It isn’t real money though, it is fake debt money, but everyone is really good at pretending it is real money.

      The key though is being eligible for those amounts of debt that are required.
      Joshy gets it. This is proof.

  17. Yeah could be the other way around too. I reckon this is a good plan to shift the responsibility to the borrower from the banks in time for a mass insolvency event.
    Step 1 – Remove the banks beware legislation,
    Step 2 – all banks “refinance the loans” of the people who cannot afford it… refinancing happens under the new legislation. Make this is a brand new loan.
    Step 3 – Then this buyer who couldnt afford the initial loan, and is now employed, certainly cannot afford the refinanced loan , will default. This time, the buyer is at fault…
    Banks get out of being blamed for having written all those loans during the hay day because they’ll say “but these are contracts in the last 6 months”. The useful id1ots “journalists” of today swallow the message without any dissection of the numbers within.

    • Professor DemographyMEMBER

      Yes, excellent points and this would protect them even if the legislation is not retrospective. Although I am betting that it will be retrospective.

      • I actually thought contracts law cannot be retrospective… i.e. Tax law is a bit different in that you can include in this year’s taxation to look at the last 6 years of income etc.. but even that, is a bit grey. I thought you had to view contracts in the time of the legislation they were written in. Although, you could make contracts with certain clauses now illegal, requiring new ones to be drawn up to proceed with the debt arrangement in future.

    • Yeah, gets the banks off the hook of responsility, but not the whole economy ponzi, it’ll go belly up just the same way only faster, with the banks holding the property, just no court cases holding them responsible.

  18. Professor DemographyMEMBER

    I suspect the legislation will be retrospective and this give the game away that this is largely about protecting the banks and legal system from a shit storm come 2021 when the extend and pretend legal framework ends.

    • But the last depression added much vitality to the world. We would not have had “The Grapes of Wrath” without Wall Street speculators and relaxed finance – to hell with food, shelter and Maslow. I’m looking forward to Josh Frydenberg’s tell-all in about a decade’s time about how he got set up to carry the can by the evil bankers that he was powerless to stop. In fact, I can feel a tear welling for his story even now. But imagine the vibrancy. Dr Allen will be drinking it in down at the soup kitchen.

  19. If you have not read “The Lorax” to your kids, now is the time to do so. I suggest a couple of changes are in order so that have better context:

    1. The Onceler = Frydenturd

    2. Thneed = easy finance

    All else can be left as is.

    Spoiler alert: The ALP isn’t in this story either. I’m still looking for someone in Australia to be ‘The Lorax’ (who speaks for the trees and the people) but there isn’t anyone. The Greens auditioned for the role, but I pointed out that they are relations of the Onceler who work in the factory – they already have a part. When the factory profits crash with the last of the Truffula trees gone they p1ss off fast to find another gig.

    • I meant no harm I most truly did not, but I had to grow bigger so bigger I got. I biggered my factory, I biggered my roads, I biggered the wagons, I biggered the loads, of the Thneeds I shipped out I was shipping them forth from the South, to the East, to the West. To the North, I went right on biggering selling more thneeds. And I biggered my money which everyone needs.

      • “I called all my brothers and uncles and aunts and I said, ‘Listen here! Here’s a wonderful chance for the whole Once-ler Family to get mighty rich…’ Sir! You are crazy with greed. There is no one on earth that would buy that fool Thneed!”