With the country struggling to recover from a coronavirus– Inflicted recession, the authorities invested billions in the economy, lowered interest rates to record levels and introduced a system of wage subsidies.
New measures to stimulate demand for credit are underway, including the abolition of ‘responsible lending’ laws and the Reserve Bank of Australia (RBA) to cut interest rate again to 0 , Only 1% and to increase its purchases of bonds, which will inject more money into the economy.
But bankers say they don’t need the extra cash.
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Shayne Elliott, Director of Australia and New Zealand Banking Group Ltd, said: “There’s all this liquidity flowing and I don’t have a productive use for it because people don’t want it.
“Money is essentially free today. Making it more free doesn’t really change anything. ”
Announcing a 40% drop in profits, Mr Elliott added, “It’s actually becoming a bit of a problem because it… becomes a drag on our margins. ”
Net interest margins, a key indicator of bank profitability, have already fallen from over 3% in the early 2000s for the four major lenders to just over 2% now, according to official data.
Banks say another rate cut and more RBA money shouldn’t increase demand for credit.
One of the reasons people are reluctant to borrow more is that Australia’s household debt-to-income ratio is at an all-time high of almost 200%, compared to a median level of less than 150% for 22 advanced economies.
At the height of the COVID-19[feminine[feminine pandemic, credit growth in Australia declined as workers and businesses accumulated cash and banks were more risk averse, with repayments of nearly one in 10 dollars on their loan books frozen under abstention plans.
While there are signs of recovery, with signs of economic growth, the overall outlook remains bleak, business bankruptcies are expected to increase and unemployment is expected to remain high for a long time.
Joseph Healy, managing director of specialist lender Judo Bank, said: “Liquidity is not the problem at all.
“The big banks are overwhelmed with the challenges of dealing with their existing customers, so they’ve been much more careful in lending to new customers. “