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Speaking at a MaxCap banking forum in Melbourne on Thursday, Mr Keating said the “dramatic acceleration” in investor lending was a direct result of SMSFs and their ability to borrow.
“If I was treasurer today, I would be looking very hard at the whole entitlement or availability of debt to SMSFs,” Mr Keating said.
“They have gearing available to them and, of course, many of them are taking the option of buying residential property.”
Mr Keating’s comments come after the Reserve Bank flagged the high proportion of investor loans – now 50 per cent of all mortgages written – as a systemic risk.
“The fact that half the loans now are coming from investors, the fact that the speed has picked up so dramatically has to mean that lending standards are suffering,” he said.
“If banks tell you lending standards are not suffering at all, don’t believe them.”
In its Financial Stability Review last month, the RBA warned the Australian mortgage market is becoming “unbalanced”, saying that an increase in the use of interest-only loans by investors may be consistent with increasingly speculative motives behind current housing demand.
The RBA is currently in discussions with APRA about implementing macroprudential tools to rein in investor lending.
The central bank’s jawboning has sparked a heated debate over the rise in investor finance, the use of macroprudential tools, and what alternative measures could be taken to rebalance the mortgage market.
Bank of America Merrill Lynch chief economist Saul Eslake recently flagged negative gearing as the key issue, but Mr Keating’s comments now bring SMSFs into the discussion.
The Financial System Inquiry’s interim report warned that if SMSFs continue to borrow to buy residential property it “may create vulnerabilities for the superannuation and financial systems”.