Australia’s home of business interests, Business Spectator, has struck another blow for schadenfreude this morning with a spectacular appeal for help for the mortgage sector from Mark Bouris. Bouris, the suave mortgage maestro of Wizard mortgages fame, has this morning leapt into the yawning gulf between Australia’s new growth model (resources) and the old growth model (himself).
Believe it or not, ‘Middle Australia’ is actually worse off now than it was during the depths of the GFC.
Today, these households have their backs against the financial wall. They face acute cost of living pressures as demonstrated by the latest inflation data. Partly as a consequence, they are paying the steepest mortgage rates in the developed world, rates which are only heading higher with no real signs of relief. Non-resources exporters, such as manufacturers, and import-competing industries, like tourism, are being rendered non-competitive by the record exchange rate that risks flying to further record highs over the next several months.
Now look, you’ll get no argument from MacroBusiness on this. H&H has carried the torch against Dutch Disease pretty much alone for the last year. And MacroBusiness has been very upfront about the downside risks attached to the debt Godzilla than others. But, ask yourself, what is Mr Bouris after here? First, he cites the long suffering mortgage holder:
Where does that leave Middle Australia? A family earning a total of $150,000 per annum might now be considered “wealthy”, but how far does that go when they are juggling a mortgage, car payments, school fees, rising petrol, food and utility prices, and face more interest rates hikes, new taxes and a flood levy? Middle Australians are working six days and worrying seven nights a week because they don’t have enough money to keep their families afloat.
Then, it’s on to the banks:
If the major banks raise provisions for doubtful debts, there is a risk that Australia’s global reputation for good mortgage behaviour will be polluted. If our reputation is sullied because of these pressures, then sound the death knell for the revival of the residential mortgage-backed securities market and we can look forward to further entrenching our big four banks.
And he closes with a howl for protection:
Something needs to be done
And presumably, that something, is more debt!
Let me gently remind the reader that it was the non-bank lenders that led the decline in lending standards across the millennium. It was they that first created low-doc loans, then no-doc loans and non-conforming loans. I might also add that securitisation that was at the heart of the GFC, not traditional banking.
Rest assured Mr Bouris, all that can be done, will be done. The government is with you. In just the last month, Treasurer Swan has announced the purchase of billions more of RMBS, the Senate has endorsed a plan to use the Budget to back non-bank mortgages, the Budget quietly killed off plans to boost housing supply and political leaders are now trying to bully the young into buying overvalued properties. There will undoubtedly be more help coming.
But will it be enough? Nope.