Yahoo News Australia's banks escape the heat as economic growth slows, Deloitte says
Australia’s banks made a “Houdini-like” escape from revelations about their questionable lending practices as policymakers “opted to sweep some things under the carpet” for short-term economic gain, a new report by Deloitte Access Economics says.
The September Business Outlook report, released on Monday, said the housing bubble and the aftermath of the banking royal commission had been expected to put credit growth “in the naughty corner” for an extended period.
“But the short term costs to economic growth of reforming banking spooked policymakers, who’ve opted to sweep some things under the carpet and to throw stimulus at housing prices,” the report said.
“That will see the banking sector rev up its growth once more. But it also kicks a can some distance down the road.”
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This month, Guardian Australia revealed that a heavy campaign of lobbying by the banks preceded the treasurer, Josh Frydenberg, telling financial regulators not to enforce responsible lending laws “too stringently”.
The government’s tone has changed markedly in recent months, from a generally tough-on-banks stance following the Hayne royal commission to a new emphasis on the “personal responsibility” of borrowers.
Deloitte Access Economics said that banks’ profits would be tempered by low interest rates, which would squeeze margins more effectively than competitive forces.
The report found that slowing global growth has actually helped the Australian economy, which should keep muddling through despite heightened global uncertainty.
It said China had responded to the global slowdown with stimulus, which had helped Australians selling products like iron ore and coal into the region.
“The bad news is that, although global events have so far helped our economy rather than hurt it, that could change fast. The geopolitical landscape is littered with risks to an extent not seen in decades.”
The report describes an uncertain world run by “dictators and dumbos”, but says damage done to economies by trade wars and global crises so far appears relatively contained.
It said the largest single driver of the slowdown was no longer escalating trade wars, but families and businesses who had “lost confidence in the ability of political leaders to govern wisely.
“Amid that rising uncertainty, business in particular has wound back the money they spend today to help them sell more in the future.”
In Australia, stimulus through interest rate cuts and tax cuts should limit any damage caused by the drought and the deflation of the housing bubble, provided the economy can steer a course clear of global chaos.
“So, absent a spanner in the works from a global threat, Australia should keep muddling through the aftermath of a housing bubble and a drought. Growth won’t be flash, but it should slowly lift. Yet that recovery looks unlikely to develop sufficient momentum to see wages accelerate or to see unemployment fall much over the coming year.”
