APRA has ‘opened a can of worms’, says economist

A leading economist has questioned APRA’s investor lending crackdown in light of the Reserve Bank’s recent shock over a $50 billion home loan error.

Speaking to Mortgage Business, Domain Group senior economist Andrew Wilson said the regulatory crackdown on investor lending needs to be questioned if the integrity of the bank data that it was based on is now being scrutinised.

“I think there is an issue here in terms of the capacity for investors to switch to owner-occupier and back again, but also the nature of data collection,” Mr Wilson said.

“The RBA recently found $50 billion in unaccounted for investor lending, which really does create a lot of head scratching.

“If we have to question the integrity of the data, really, doesn’t that question the whole nature of the policy as it has been introduced?

“We are not just looking at the outcomes of the macroprudential policy but the nature of the recording of the particular data.

“It is just a can of worms that has been opened. It’s not just questioning the need for a model in the first place, but it is now questioning the foundation of the model itself, and whether the outcomes are measurable in terms of rigor. Particularly given that the sharp fall in investors was matched with a sharp rise in owner-occupied finance,” he said. “It just looked a little skewed.”

Mr Wilson’s comments come after the Reserve Bank of Australia expressed its concern over a number of data problems that have emerged as Australian lenders split investor loans from owner-occupied loans.

Speaking at the Finsia Regulators Panel in Sydney on earlier this month, RBA deputy governor Philip Lowe said that recent problems with the data relating to banks' owner-occupier and investor housing loans have complicated the central bank’s understanding of what is going on in the housing market.

“These data problems have emerged as lenders have taken a closer look at their housing loans following increased supervisory scrutiny,” Mr Lowe said. “As lenders have looked more closely, what they have found has surprised and, to some extent, concerned us.”

Next year APRA, the Reserve Bank and the Australian Bureau of Statistics will undertake a thorough review of the home loan data collected from Australian banks.

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