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APRA says everything is fine in housing market, but look at credit cards - SMH - JUNE 4 2015 Gareth HutchEns Australia's financial regulator says it is not too worried about Sydney and Melbourne's property markets, despite serious concerns from Treasury and the Reserve Bank about a housing bubble. But it agrees there ought to be closer scrutiny of the interest rates banks are charging on their credit cards, saying it cannot see why credit card margins are so high.
Australian Prudential and Regulation Authority chairman Wayne Byres told senators in Canberra on Wednesday he had the power to use policies that target specific housing markets in Australia – such as Sydney and Melbourne – to prevent bank lending practices from becoming too loose. But he did not think he needed to use them, he said, because his warning to banks last year that he was watching their lending behaviour seemed to be having an effect. He said the annual growth rate in housing credit growth – a key driver of property price rises – was heading towards 15 per cent last year so he warned banks APRA would be using a benchmark of 10 per cent as an "important risk indicator". "They've been co-operative in terms of changing practices," he said. At the time we sent our letter, the growth in investor lending was about 10 per cent but it was accelerating, it was heading towards 11, 12, 15 per cent." "It's still hovering around 10 per cent [but] we're arguing around the decimal point here, 10.3 per cent, 10.4 per cent, so I think we've had some moderating impact and I suspect we'll have some more moderating impact over the coming months." He said APRA was prepared to do more to cool investor activity but it didn't seem necessary at this stage. The comments follow warnings by Treasury Secretary John Fraser, who on Monday said Sydney's housing market was showing "unequivocal" signs of a housing bubble, as were upmarket areas of Melbourne. "It does worry me that the historically low level of interest rates are encouraging people to perhaps over-invest in housing," Mr Fraser told senators. Reserve Bank assistant governor Dr Malcolm Edey also told senators he was concerned about Sydney's housing market. "We agree that this is a situation where the market is strong, it's overheated, it's a risky situation," Dr Edey said. But Treasurer Joe Hockey said on Wednesday that record low interest rates were encouraging new investment in housing supply across Australia, and this was to be welcomed. "If there is a concern about elevated house prices, Sydney or parts of Melbourne, then the best way to respond is with increased supply," Mr Hockey said. "What you're seeing in the National Accounts is clear evidence that there is a significant increase in the supply of housing, and that's to be welcomed." Mr. Byres also agreed with Treasury, the RBA, and the Australian Securities and Investments Commission officials that there ought to be closer scrutiny of the interest rates banks are charging on their credit cards, because the current "spread" between the official cash rate and rates charged on credit cards was at record levels. "I understand the point fully that the margins on credit card business look very high, certainly to any other form of credit, and certainly I can't sit here today with an explanation of why that is," Mr Byres said. "Informing us all about that is probably a useful piece of work."
Our financial
services regulators continue to fiddle while Rome burns. They each have a
charter to monitor, not to have to be told by Treasury. |
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