Federal Treasurer Scott Morrison has promised to use a scalpel and not a chainsaw when responding to concerns about the declining health of lending standards, housing risks and the accountability of the national financial system.
Responding to questions following his address, Thursday, at the AFR Banking & Wealth Summit in Sydney, the Treasurer said he preferred to take a wait-and-watch approach to the safe management of the housing market.
“Watch and monitor, and then take whatever steps necessary,” the Treasurer said.
Morrison told reporters on the sidelines of the summit that Australian government regulators would continue to monitor risks to household balance sheets, and “promote sound lending practices” by Australian financial institutions.
He lambasted suggestions from the opposition that interventionist policies were the solution to the prospect of an overheating sector.
“My preferred approach is to use a scalpel not a chainsaw and the current range of measures from the regulator have been the responsible approach to dealing with it,” Morrison said.
“Abolishing negative gearing and some of these other heavy handed approaches … well, if you want to realise a housing shock then get out that chainsaw,” he added.
APRA began implementing measures in response to concerns about declining lending standards and growth in lending to housing investors in December 2014.
And just last week the prudential regulator took further action with what the Treasurer described as a “calibrated and proportionate set of measures” to limit the share of interest-only housing lending.
The decision by APRA to announce these measures was “the right one”, Morrison suggested.
“I think we have to continue taking a calibrated approach, a careful, measured and proportional approach, and so in the meantime our policy has been to back up the regulator,” he said.
The government was, according to the Treasurer, “addressing the problems in our banking and financial system to ensure our banks and financial institutions are held to account by ensuring customer disputes are heard and resolved".
“We are maintaining competitive pressures in the system to ensure that customers get the best deal and that there are serious sanctions in place to deal with bad behaviour and malfeasance.”
Not only has the government increased ASIC’s power when dealing with malfeasance and contrary conduct in the banking system, but the ongoing inquiry into the banking and financial system by the House of Representatives Economics Committee, “continues to keep the tension in the cord” on progressing reform while “holding the banks to account”, Morrison said.
He added that Minister for Financial Services, Kelly O'Dwyer, was taking further action through the Ramsay review as well as the recommendations contained within the (Australian Small Business and Family Enterprise Ombudsman) Carnell Report.
“To put in place a more effective, more accessible and more affordable dispute resolution process for banking customers. She is moving on the Carnell Report recommendations, on a last resort compensation scheme and providing access to redress for past disputes,” the Treasurer noted.