Coalition pledges to reform lending

In a joint statement on Thursday (20 February), the Coalition announced it would seek to reform prudential settings to encourage more lending should it win the upcoming federal election.

While details of the plans have not been released, the shadow Treasury said that it would “reset APRA’s statement of expectations” in order to “balanc[e] financial stability with providing internationally competitive access to finance for Australians”.

Taylor and Howarth said: “Financial stability will remain paramount and APRA’s primary financial stability objective will remain unchanged.

“But the Coalition’s expectation is that regulation must enable opportunity, not stifle economic growth.”

As part of this, the Coalition said it would:

• Adjust lending criteria to support home ownership, “ensuring serviceability requirements reflect the interest rate cycle”. The shadow assistant treasurer revealed earlier this month that the Coalition was “ looking closely” at whether the serviceability buffer (currently 3 per cent buffer) is “appropriate”.
• Expand small business lending, saying “no Australian should need to own a home to start a business”.
• Increase banking competition by easing regulatory burdens on regional, mid-tier, and smaller banks.
• Prevent the “overcapitalisation of insurers” to lower consumer costs and free up capital for investment.

The Coalition has also pledged to “ensure competition and consumer interests are prioritised” and would therefore make the Australian Competition & Consumer Commission (ACCC) a permanent member of the Council of Financial Regulators (the coordinating body for Australia’s main financial regulatory agencies).

Currently, the CFR comprises the prudential regulator APRA, the financial services regulator ASIC, the Treasury, and the Reserve Bank of Australia.

Outside of lending reform, the Coalition is also looking to simplify corporate laws, starting with Chapter 7 on product and market regulation.

According to the shadow Treasury, this would act on the Australian Law Reform Commission’s 2023 report, which recommended progressively simplifying corporate laws.

“Australia’s corporations law is overly complex, harming productivity and increasing costs for small businesses and consumers,” the Coalition said.

Other changes the Liberals have pledged to spearhead include a move to “revive the corporate bond market” in order to give retail investors and, particularly retirees, access to stable fixed-income options and a push to streamline disclosure requirements and introduce “more flexible bond terms to unlock $1 trillion in investment opportunities, funding business growth and reducing borrowing costs”.

Announcing the pledge to “unwind red tape to grow economy and beat inflation”, Taylor and Howarth said: “The Coalition will reform Australia’s financial services sector to drive productivity, unlock investment and support aspiration.

“A Coalition Government will make Australia a global financial hub that is both stable and innovative.

“Financial services are the arteries of the economy – essential for starting a business, buying a home, and building prosperity. Yet, excessive regulation and compliance costs exceeding $1 billion for some firms have clogged those arteries, driving up costs and limiting access for Australians.

“Over-regulation has left Australians under-insured, under-advised, and under-banked. The Coalition will remove unnecessary barriers and ensure financial services work for all Australians – not just a privileged few.

“These reforms will boost investment, enhance competition, and rebuild Australia’s financial services sector to better serve Australians.

“They complement the Coalition’s broader agenda, including allowing reasonable access to super for housing, reviving the Consumer Data Right, and rebuilding financial advice through the Quality of Advice Review.

“Most importantly, they will empower young Australians to start businesses, invest with confidence, and buy a home.”

The Property Council of Australia has welcomed the Coalition’s announcement, with CEO Mike Zorbas saying “a fresh look at balanced regulations” would provide access to new homes when they are needed most.

“Regulatory frameworks need the flexibility to provide appropriate checks and equally enable the right volume of access to finance and we welcome ideas that support this,” Zorbas said.

“A sensible safety net is important and within that frame so is ensuring as many Australians as possible can own their own homes. The first and most crucial step remains increasing housing supply – we can only overcome the housing crisis by building more homes.

“Decades of slow approvals and more recent rising construction costs and labour shortages mean we urgently need to shrink our housing supply deficit.

“We urgently need to streamline regulations, grow the workforce and remove tax barriers to boost investment in new homes.”

What is the government doing on lending?

The move to update lending comes after the Albanese government also recently revealed a push to adjust lending rules. Earlier this month, federal Treasurer Jim Chalmers called on Australia’s regulators to help make it easier for Australians with student debt to take out a mortgage (with a consultation now having been launched) and clarify guidance to help “unlock the construction of more units” (which it has now done).

The Treasury also announced that it will ban foreign purchases of established dwellings from 1 April 2025 until 31 March 2027 in an effort to ease pressure on the housing market.

You can find out more about the Coalition’s plans to overhaul financial services in this podcast episode with Luke Howarth, the shadow financial services minister and shadow assistant treasurer of Australia, here:

[Related: Shadow financial services minister reveals how the Coalition would improve housing affordability]