Let me show you how Australia’s corrupt Game of Mates works.
As the RBA hikes rates to snuff out the Albanese Government’s energy inflation pulse, and the latter blames that outcome on the RBA, Australia’s second arm of monetary policy, APRA, is moving into position to do the complete opposite, under pressure from a former Labor premier turned banking lobbyist.
The upshot of this is that the two arms of monetary policy are about to work completely at odds with one another. Just as the Treasurer writes idiot documents about reforming capitalism, and has a pretend inquiry into the RBA, which explicitly excludes APRA.
Instead of being a national scandal, the whole thing is reported as a “helping hand” for borrowers by the treasonous AFR on page whatever.
From a public policy point of view, this schmozzle is so perverse that you can’t even see it as the plan of an evil genius. It is the expression of many tactical decisions by well-dressed and morally flexible lowlives engaged in control fraud.
It is the Rum Corps in action, unchanged after 220 years.
As for you, and the national interest, forgedaboudit!
Analysts say the prudential regulator is likely to reduce so-called serviceability buffers to allow borrowers to get bigger loans as it prepares to release what will be a closely watched review of its housing market lending rules within the next fortnight.
Changing the interest rates used in loan serviceability tests could increase borrowing capacity in a higher interest rate environment. The Australian Prudential Regulation Authority has already declared it was open to adjust settings to avoid strangling credit growth in the housing market.
…Commonwealth Bank’s interim results on Wednesday will maintain focus on mortgage growth and lending standards, after Australian Prudential Regulation Authority chairman John Lonsdale said it was open to revisit serviceability buffer settings if economic conditions change.
When the cash rate dropped to 0.1 per cent in October 2021, APRA told the banks to increase the mortgage serviceability buffer, which is used to assess new loans, from 2.5 per cent to 3 per cent. It also removed a 7 per cent “floor” rate at which assessments could not drop below, lifting borrowing capacity and maintaining the housing boom.
…But with the cash rate now at 3.35 per cent and with at least two more rises to come, analysts said the current buffer needed to change or it would overtly constrain credit growth.
“Keeping the serviceability buffer at 3 per cent now risks amplifying the housing credit growth downturn and creating more downside to property prices and activity. And if the RBA is aiming to achieve a ‘soft landing’, then macroprudential policy should not be adding to downside activity risk,” Citi analysts said in a note.
And I thought that the RBA was raising interest rates to “constrain credit growth”, as well as sink house prices to suppress demand so that inflation comes down. Wouldn’t the second arm of monetary policy be better off lifting the buffer so that it was working with the RBA and helping prevent reckless borrowing into the bust?
All APRA will do is lift interest rates even higher, hammering household income harder, which will then be blamed upon the new and soon-to-be former RBA governor.
An alternative reading of these events is that the banks are in a full-blown panic about the fixed-rate mortgage reset.
