The head of Westpac Australia says Aussie house price falls and the recent economic slowdown are not due to the banks' restricting lending in the wake of the royal commission.
Appearing before a parliamentary committee in Canberra, Westpac Australia chief executive Brian Hartzer said the there had been “a lot of recent commentary” pinning the slowdown on the “wealth effect” as house prices decline.
“There is also a suggestion that the royal commission has caused banks to tighten lending, and that this is what’s driving falls in house prices,” he said.
“Our view is that the wealth effect is real — if hard to quantify — but that price declines are more to do with housing supply and demand factors than with banks’ tightening credit.”
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Mr Hartzer said Westpac’s risk appetite hadn’t changed significantly in the past 12 months and approval rates had been steady, although approvals were taking longer due to “more extensive verification” of customers’ expenses.
Last financial year the bank lent more than $75 billion to homebuyers and $7.3 billion to small businesses. “The bigger issue is that not as many people — particularly investors — are applying for loans,” he said.
“We see this as a natural response to a recent increase in the supply of housing, along with a fall in foreign investor demand and increased uncertainty about future returns from housing investment after a significant run-up in prices.”
Mr Hartzer described it as a “cyclical adjustment after six strong years of growth, that so far regulators and banks are managing reasonably well”.
“Having said that, uncertainty about the future direction of regulation and government policy is having an effect on business and consumer confidence,” he said.
“As further reforms and legislative changes are enacted, it will be important to avoid changes that unintentionally impact the availability or pricing of credit, or have detrimental effects on the very consumers they are designed to protect.”
House prices across the country fell for the 17th consecutive month in February, with Sydney and Melbourne now 13.2 per cent and 9.6 per cent from their respective peaks in July and November 2017.
Economic data released Wednesday showed Australia’s growth rate slowing to 2.7 per cent in calendar 2018 and just 0.2 per cent in the December quarter.
While Australia has not had a recession — defined as two consecutive quarters of negative growth — for nearly 30 years, some economists have seized on the figures to claim the country is now in “per capita recession”.
When divided by head of population, Australia’s GDP growth actually contracted by 0.1 per cent and 0.2 per cent in the September and December quarters.
Some experts say the figures highlight the country’s over-reliance on high immigration to artificially boost economic figures while living standards go backwards.
- news.com.au
