Speaking at the Australian Business Economists lunch in Sydney on Wednesday, APRA chairman Wayne Byres addressed the impact of regulatory activity on the flow of home lending.
“It is difficult to tell,” Mr Byres said. “Because while APRA’s actions primarily influence the supply of credit, we are only one factor that influences the supply of credit. There are also a range of factors that may have impacted the demand, including things like affordability constraints and tax policy and changes to foreign investment rules.”
Mr Byres said that changes in lending practices to date “don’t seem to have had an obvious impact on housing credit flows in aggregate”.
He cited APRA data that shows total housing lending in the year to March grew around 6 per cent, which is only marginally below the long-run average housing credit growth for the last decade and roughly in line with the average run rate since 2011 — the last time Australia went through a period of softening house prices.
“Cumulative credit growth in the three and half years since we stepped up the intensity of our actions was actually greater than cumulative credit growth in the preceding three and a half years,” Mr Byres said.
The APRA chairman noted that credit growth “appears to be slowing somewhat at the moment”, which he said is not surprising in an environment of “softening house prices and slowly rising interest rates”.
His comments come after UBS warned that Australia is at risk of a “credit crunch” as a result of regulatory action.
UBS analyst Jonathan Mott said that the investment bank is concerned with the royal commission’s “rigorous interpretation” of the responsible lending laws, APRA’s focus on sound lending practices and the Labor Party’s pledge to limit negative gearing should it win the next federal election.
“Given these headwinds, we expect a sharp slowdown in credit growth. Whether this turns into a more disorderly correction, or if there are any potential political interventions, remains to be seen,” Mr Mott said.
[Related: Banks ‘slow to respond’ to weak income growth: APRA]