Australia Macro Service > Australia Research Briefings

No bite from Hayne but credit conditions remain tight

As we anticipated, from an economic perspective the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Hayne report) was all ‘bark’ but no real ‘bite’. The 76 recommendations largely focused on proper implementation of the pre-existing rules for lending and bank commissions, changing the culture within the sector, and other aspects of financial services including mortgage broking and insurance.

We expect the report to have a minimal impact on bank lending practices going forward. But this is set against a significant tightening of lending conditions over the last nine months. Anticipating the commission’s findings, banks have been more strictly enforcing lending best-practice rules, which has fed through to credit availability (particularly for mortgages). This has significantly exacerbated the downward correction in house prices, which – in turn – is weighing on dwelling construction and to some extent household spending. Partly because of these shifts, we expect overall GDP growth momentum to slow, to 2.5% this year from an estimated 3% in 2018.

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