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Despite assurances from RBA governor Glenn Stevens that the likelihood of a global catastrophe had declined, the mortgage industry remains doubtful that the worst of the financial crisis has passed.
Of the 1,053 respondents to a recent Mortgage Business straw poll, 70 per cent of respondents fear that further pain still lies ahead.
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Just 22 per cent said the worst of the financial crisis had passed while eight per cent remained unsure.
Shane Oliver, chief economist at AMP, told Mortgage Business that while there were some positive signs [for the economy] it was hard to predict when the situation may improve.
“Those eight per cent of respondents who said they didn’t know were probably pretty smart,” he said.
Dr Oliver was hopeful that the financial system may have bottomed out however he had concerns that the worldwide slowdown and the blow to Australian consumer confidence remained a threat to the domestic economy.
“We’re really only just starting to see the impact on the broader economy. Usually it takes a year or two for these things to play out,” he said.
“If consumers aren’t confident they’ll look to reduce debt levels and we will see a sharp slump in consumer spending.”
Dr Oliver said Australia faced the unpalatable prospect of six to seven percent unemployment and a 50/50 chance of recession.
But despite the uncertainty, economist and CEO of Peach Home Loans Nicholas Gruen said there is still potential for brokers to grow their business.
“In terms of its offering to consumers, the mortgage industry has a good story to tell – falling margins and interest rates on the back of a government guarantee and RBA easing,” he said.
However a lack of demand due to borrower uncertainty could hold activity back, he said.
“I doubt house prices will fall by a lot, so when that becomes clear, things should improve.”
Both Dr Gruen and Dr Oliver agreed that the government’s stimulus package and deposit scheme would boost the economy, but they would like to see the government step in further as and when needed.
“By and large the government has moved in the right direction and it’s likely it will do more as the year unfolds.
“The government does have plenty of firepower to spend and could easily run a small deficit,” Dr Oliver said.
