Treasurer Josh Frydenberg has revealed that the federal government has held discussions with Australia’s largest lenders and the Reserve Bank of Australia (RBA) concerning the looming expiry of loan repayment holidays, offered to borrowers impacted by the economic fallout from the COVID-19 crisis.
According to the latest data from the Australian Banking Association (ABA), banks have deferred repayments on over 700,000 loans ($211 billion) since the onset of the COVID-19 crisis, over 61 per cent of which are for residential mortgages.
Mr Frydenberg said stakeholders have committed to ensure that borrowers hit hardest by the crisis are provided with the support they need to manage the sudden resumption of repayment obligations.
“The banks were very clear – they supported their customers on the way into this crisis and they will be supporting their customers on the way out.
“The banks are working through an orderly transition so that those Australians who can make their repayments do so and that those Australians who cannot because of COVID-19 get the additional support that they need.
“This is how it should be. All Australians working together to get through this crisis.”
The Treasurer encouraged borrowers with the capacity to meet their obligations to resume paying down their debt but acknowledged that some would continue to experience financial hardship.
“We know already around 20 per cent of those customers who had been able to receive the deferred payments have now started to make their repayments,” he said.
“So, customers who can should make those repayments.
“Others who cannot because of COVID-19 will need to work with their banks, and the banks have made it very clear they’re going to continue to support those who need it.”
When asked if the government believed loan deferral period should be extended, Mr Frydenberg said that such decisions would be left to the banks; however, Mr Frydenberg noted the difficulties facing borrowers employed in sectors facing longer-term challenges.
“We know that with the restrictions coming off across the economy, people are starting to get back to work, and that’s vitally important,” he said.
“But there are still some sectors, and obviously the workers in those sectors, who are doing it very tough, and we saw just this week the terrible news out of Qantas of 6,000 people losing their jobs.
“We’re going to continue to see some sectors really struggle as the international borders remain closed and people are affected by that.”
Investment management firm Morgan Stanley estimates that approximately 20 per cent of borrowers on repayment holidays would default on their debt, triggering a $4.3-billion rise in credit losses across the major banks alone.