DAVID KOCH:
Treasurer good to see you again.
JOSH FRYDENBERG:
Good morning Kochie.
DAVID KOCH:
You're hoping these changes will reduce the time and cost of borrowing. Why do you think that is needed?
JOSH FRYDENBERG:
Credit and its flow to the community will be absolutely critical to our economic recovery. Whether it is in the housing sector, whether it is in the retail sector, whether it is in the tourism sector. Right now, we have a regulatory approach that is too complex, that is too costly, that is overly prescriptive, that is one size fits all model. What we are seeking to do is remove that duplication, streamline that process and to enable the lending to take place without borrowers having to provide their UberEats slips and their Netflix subscriptions and all sorts of details that are unnecessary to get their loan or extensions on credit cards.
DAVID KOCH:
We are basically in a credit squeeze at the moment, aren’t we? It's just too hard to borrow. But the reason it is too hard is because of the Credit Act introduced after the Global Financial Crisis when it was too easy to borrow. Borrowers lied on their application forms about how much they earned and how much they spend and got in above their heads. How do you bring that balance?
JOSH FRYDENBERG:
We know that APRA already is a regulator for the banks or what are called the ‘ADIs.’ But overlaying that has been an extra series of regulations with ASIC. So we are saying that the APRA regulations will continue and that ASIC will monitor the non-ADIs. We have also put in more protections for some of those vulnerable consumers who are using what are called “consumer leases” or “small account credit contracts.” We’re trying to get the balance right. The Governor of the Reserve Bank has commented about this and said that the banks are so concerned about getting on the wrong side of these regulations they are not providing the level of credit that we need across the economy. So it is all about getting the balance right, it’s all about it being in the interest of consumers and that is what these changes are designed to do.
DAVID KOCH:
But also borrowers have got to understand, don’t they, that previously under existing laws, the banks took responsibility for making sure you can afford the loan. Under your changes, we as borrowers have got to take that responsibility don't we? You just can't blame the bank anymore.
JOSH FRYDENBERG:
We are going to move that culture from a lender beware to a borrower responsibility. Now, a lender will only want to lend money where it is going to be profitable to do so and the hope is that their client will pay that money back. They are still going to need to verify the income and other details but right now, the system and the pendulum has swung too far one way and is not in the interest of the consumer. So this is a really significant change and will make it easier to get credit which is going to be critical to our COVID recovery.
DAVIC KOCH:
A good change. Treasurer, appreciate your time.
JOSH FRYDENBERG:
Always good to be with you.