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Jessica Darnbrough
The Australian Democrats have weighed into the debate surrounding low doc home loans, with the party's housing spokesperson calling for a Royal Commission into the Australian banking sector.
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Speaking to The Adviser, Australian Democrat David Collyer said a Royal Commission is needed to find out the true extent of the low doc scandal.
“We have often praised ourselves for having a stable banking system, when in reality we have been hiding our own sub-prime scandal,” he said.
“This has left us terribly exposed and we need a Royal Commission to find out how deep the problem runs. We need to know the size and scale of the problem, so that we can fix it and put the appropriate measures in place to make sure this never happens again.”
Mr Collyer said the Royal Commission, if it does come to fruition, would not be about naming and shaming the lenders and brokers involved, but rather understanding how and why the event happened.
“No-one is innocent in this mess, so a Royal Commission is not about finding those that were involved and punishing them. We need to do this for the ongoing safety of our banking system. If what we are hearing from the Senate Inquiry is indeed true, this problem could be big enough to demolish a major’s balance sheet – and we need all of our major banks.”
But it seems others aren’t sold on the idea of a Royal Commission.
Speaking at the recent senate committee, which looked at the effects of the global financial crisis on the Australian banking sector, the Treasury’s executive director Market Groups Jim Murphy said it was unlikely that banks, brokers or borrowers would ever return to the lending practices that were taking place pre-GFC.
“In my view, we are not going to return to a pre-GFC model for a financial system—primarily in other countries. When I say that, I do not mean our regulatory structure, which has proved quite resilient but I mean in terms of potential risks that banks may take in terms of their lending practices, the seeking of credit by consumers,” Mr Murphy said.
“I think we are seeing that in the number of consumers who are much more reluctant to leverage off their own credit. In summary, we are in this transitional period and we are actually repositioning our financial system, which is strong, resilient and has proved, from what we hear from other countries' officials, as one of the models for the rest of the world.”
