Former prime minister Kevin Rudd has questioned government-backed lending schemes, introduced as part of a broader stimulus package designed to support the economy amid the ongoing COVID-19 crisis.
“I say here formally on the public record, let’s be very careful about the implementation of this monumental stimulus package that the government has now announced,” he told the media.
“Frankly, they’re embarking upon loans programs, which have never been embarked upon by the Commonwealth in its history.
“The implementation of that will be very interesting to monitor overtime.”
Earlier this month, the government announced that it would inject up to $15 billion in funding to support lending to consumers and businesses.
The funds will be supplied to the Australian Office of Financial Management (AOFM), which will invest the capital in wholesale funding markets used by small authorised deposit-taking institutions (ADIs) and non-ADI lenders.
The $15-billion capacity would allow the AOFM to support a substantial volume of expected issuance by these lenders over a 12-month period.
The scheme builds on the government’s previous commitments to provide the AOFM with an investment capacity of $15 billion to invest in wholesale funding markets used by small ADI and non-ADI lenders.
The government-back schemes also support the Reserve Bank of Australia’s announcement of a $90-billion term funding facility for ADIs and the banking sector’s commitment to waive SME loan repayments, among other special measures.
Court-approved ban on ‘predatory lending’ welcomed
Meanwhile, the federal government has welcomed the Federal Court’s decision to uphold a ban on what it has described as “predatory lending”.
Earlier this week, the Federal Court handed down its judgement on a dispute between the Australian Securities and Investments Commission (ASIC) and payday lender Cigno regarding the banning of a model of short-term lending used by Cigno.
In September last year, ASIC exercised its product intervention powers to prohibit such lending, which it said caused “significant consumer detriment”.
Cigno unsuccessfully appealed ASIC’s decision, questioning the legitimacy of the legal grounds used to justify the ban.
The federal government has welcomed the Federal Court’s decision, with Minister for Housing and Assistant Treasurer Michael Sukkar stating that the government “will not stand for predatory behaviour by lenders” who “seek to take advantage of Australians”.
“[The] decision is a clear demonstration that the government’s reforms are working to protect consumers,” he said.
“While small amount/short-term credit and consumer leases provide credit to consumers who, in many instances, are unable to access mainstream forms of finance, there is no place for predatory behaviour by these lenders.
“The Morrison government recognises the importance of protecting vulnerable consumers of financial products and if further action is required, we will take it.”