Australia’s Economy Faces ‘Serious Consequences’ If Bank Probe Hits Credit, Morrison Says
(Bloomberg) -- Prime Minister Scott Morrison warned that Australia’s economy faces “serious consequences” if the inquiry into misconduct in the nation’s financial industry triggers a credit freeze.
- In interviews with Nine newspapers ahead of publication of the inquiry’s final report on Monday, Morrison and Treasurer Josh Frydenberg both stressed it was vital credit didn’t dry up. “I will be very mindful that I want to see the oil that lubricates our financial system, which is access to credit, continues to flow, otherwise the consequences would be quite significant,” Morrison is cited as saying.
- The comments are a reminder that Commissioner Kenneth Hayne’s report, to be handed to the governor-general on Friday and published after markets close on Monday, are just recommendations. It’s up to the government to decide what it adopts and rejects.
- With an election expected in May, the report will take on massive political significance. The main opposition Labor party, which polls indicate will win office, has suggested it will adopt the recommendations in full and says the government can’t be trusted to restore faith in the banking sector.
- The government’s concerns about a credit freeze come amid a property slowdown, triggered in part by tighter mortgage lending standards, that policymakers fear will drag on consumption. Lending to home buyers has slowed, while data Thursday showed business loans rose at the slowest pace in seven months in December.
- Frydenberg told Nine he expects the report to raise issues such as fee structures, responsible lending, the role of regulators and remuneration. The government’s response would be guided by the need to restore trust in the sector, ensure the free flow of credit and to maintain competition, he was cited as saying.
- Shadow Treasurer Chris Bowen said Labor would form a taskforce to implement the recommendations. “Labor also understands the critical importance the banking sector plays in the heart of the Australian economy,” the Australian Financial Review cited him as saying. “But that must not service as an alibi for bad banking conduct or criminality.”
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