In an interview with the Australian Financial Review, Lonsdale expressed confidence in the ability of banks to weather any potential declines in house prices, as economists predict a 20% drop from their peak due to rising interest rates. He emphasized the importance of monitoring the housing market, as it has a significant impact on the banks that APRA regulates and the overall economy.
While economists predict another increase in the official cash rate in the near future, Lonsdale noted that the banks have built up significant capital since the financial system inquiry and their continued focus on lending standards. He stated that this strong capital framework, combined with solid lending standards, will allow the banks to effectively manage any decline in housing prices.
However, Lonsdale acknowledged the potential challenges posed by a deteriorating economy, and indicated that he may consider adjusting APRA's macroprudential policies to prevent banks from limiting access to credit. These policies, such as the "serviceability buffer," require banks to assess new loans at a rate higher than current market rates.
Lonsdale stated that the current macroprudential policies, including the serviceability buffer, are appropriate for the current economic climate. However, he indicated that if the facts change, APRA's views may change as well. He also noted that APRA will closely monitor key indicators, such as credit growth and lending standards, throughout 2023 to determine if any changes are necessary.
Despite the potential challenges posed by a slowing economy and declining housing prices, Lonsdale emphasized the resilience of the financial system and the ability of banks to withstand stress. He stated that APRA will continue to stress test the banks to ensure their soundness even in challenging circumstances.
