The Road ahead looks rocky – post Banking RC - Steve Marsten
I’m beginning to think the Australian economy will be in a scarier place by years end. I recently worked with a couple who are amazing savers. They both earn around $70,000 living in the middle of a major city and over a 5 year period saved $140,000 plus a deposit of $44,000 that they paid for a Brisbane Unit ‘off the plan”. In a few months they get to pay the remainder of their purchase and receive the keys to their new investment unit. When they signed up credit was easy in Australia. That was just under 2 years ago. In the past 12 months banks have all increased their interest rates and suddenly become scared to lend money to customers unless of course they were already wealthy. Suddenly lending more then 70% LVR has become problematic for the bank and now they want mortgage insurance even though these clients have funds (for a different purpose) in their bank.
This was all before the Royal Commission (RC) however you could see that they were preparing for the RC outcomes. I for one, feel the RC was overdue and I’m glad it happened. We all need the spotlight placed on areas of concern occasionally and get processes cleaned up. Whether the outcomes make sense is another thing.
Let me expand on this point. The Honourable Kenneth Hayne suggests banks tighten up their processes. Sounds worthwhile. He also suggests that mortgage brokers charge for their services. Thinking that through – so now the banks aren’t paying brokers – the public is. Brokers go out of business because the public doesn’t want to pay for this service. That’s 10,000 businesses on the scrap heap. Where do we go now? Of course - back to the banks. I’m not sure that’s the outcome we want.
And the mother of all suggestions – instead of making APRA and ASIC do their jobs – lets spend more public funds on a new watchdog bureaucracy to oversee the other two watch dogs. The new government will probably make the banks pay for the new watchdog and the banks will make us pay for their increase costs of banking.
Overall, banks will double down on the tightening of their money lending in this country. Further, this will dry up demand for property and quicken the fall in those markets.
I really hope the powers that be take a big glass of common sense and consider more innovative ways to implement the Henry report then what Mr Henry proposes in its raw form.
For more information on the Royal Commission outcomes – feel free to ring our team at UHY Haines Norton on 07 49 721300.