Housing Prices, Global Sell-Off And Hayne’s Interim Report: Australian Markets Have Seen A Lot

WBC

Even though the current state of the global markets is not good, it can be said that Australian markets have been going through a rough patch lately. It seems like lower levels of the currency, declining housing prices, subdued income growth were not enough and hence, the news related to the interim report of Hayne broke which reflects that overloading the new regulation might negatively impact the economy as a whole. Westpac Banking Corporation’s (ASX: WBC) chief executive officer or CEO stated that the politicians need to be cautious about the new regulation, with respect to the banking sector, which has the potential to impact the economy. If the credit terms for the businesses are not eased, it could severely impact the borrowing capacity of the business houses which could have the macro level affect.

The chief executive is also supportive of the easier regulations which was recommended by Kenneth Hayne. According to the management of Westpac, the housing market is also being suffered because of the lower prices, the growth momentum in the income is also not robust and the spending behavior of the consumers might also get impacted. Hence, the regulations in regard to borrowing capacity of the individuals, businesses as well as the rules for the financial advice need to be decided carefully. As per the interim report, the greed was the primary reason which prompted the financial institutions to mislead the customers. 

However, the Australian government is very much aware of the consequences which might arise if the lending to the business is restricted as is stated by the Treasurer of Australia, Josh Frydenberg. According to Josh, he won’t be rushing to apply the strict rules and regulations on lending as this could severely cap the growth of the economy. Moreover, the Australian economy is already facing the problems because of the global macro factors and thus, it would be in the interests of the economy to not to impose restrictions on lending. The latest report of International Monetary Fund or IMF also suggested that Australia might be impacted by the escalating trade tensions between the US and China. Yesterday i.e. October 11, 2018, the Australian markets witnessed significant downtrend primarily because of the negative momentum witnessed in the global markets as well as higher yields on the debt instruments.

Another factor which has been the reason that the treasurer is not imposing restrictions is that if additional regulations have been made necessary it might wipe out the small financial companies from the Australian market and, as a result, it could further strengthen the position and hold of the big four lenders which are currently operating in the Australian financial markets. The additional layer of regulations would severely impact the borrowing capacity of the low-income people. Therefore, this would mean the people which already possess significant amount of assets as well as money would be able to have greater access to the credit. Bottomline, several factors need to be considered before coming up with any sort of decision.

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