Big changes are reshaping Australia's lending landscape.
From economic uncertainty and federal budget tax measures to the rapid rise of artificial intelligence and growing concerns around mortgage fraud, the forces influencing the mortgage and finance industry are evolving quickly. Against this backdrop, the sector is being challenged to adapt while continuing to support borrowers in an increasingly complex environment.
Australian Broker has rounded up Mulino's key takeaways from the conversation.
"We want productivity; we want competition. That tends to get better outcomes for consumers through lower prices," Mulino said. "But also, through better product offerings, through innovation, and through firms and advisors and brokers in competitive markets having to tailor their services to meet the particular needs of consumers. So productivity and competition are really important when it comes to driving consumer outcomes both in the short term and the long term.
"We need regulation also, because, I think we need — particularly in relation to services that are so important to people like the services supporting them, making these very important and complex decisions — guardrails around that," he continued. "Sometimes those guardrails actually promote better markets and productivity and efficiency in that they provide consumers with clearer choices. They provide them with more informed settings in which to make choices between providers. And so I think that, in providing greater trust and confidence, well designed regulation can actually underpin better competition and productivity.
"There are times when sometimes better protection and efficiency and competition can come into a bit of tension and we need to balance the interests of consumers versus the market operation," Mulino added. "And I think that's a constant challenge for a good regulatory design. But I think most well designed regulation will actually, I think, enhance good market outcomes."
"The [recent] budget included a lot of changes when it comes to the housing market," Mulino said. "Obviously, there was a big focus on trying to address some of the issues of intergenerational fairness that had been preventing a lot of younger people and first homebuyers entering the market. So there were some big structural changes around negative gearing and capital gains tax. So we grandfathered all current negative gearing arrangements.
"But we said moving forward, there could only be negative gearing on new builds," he continued. "And we felt that was a way of trying to encourage a more balanced approach to the housing market overall between people trying to buy their first home, versus investors, while retaining options for investors to negatively gear new builds.
"We're also trying to add to supply, providing more access to housing is one of the big challenges for government," Mulino added. "And this budget builds on a range of measures, particularly on the supply side in previous budgets. Some of those advantages [of broking] come into play in particular for particular cohorts, like younger people, [or] first homebuyers who are navigating that system for the first time. But also a lot of other people, often elderly people or people from a [different] background who just struggle with the complexity of the system. So I think there's the broader benefits of broking and advice. But there's also particular benefits for certain cohorts."
"[This is] a complex sector and we want to ensure that when we put ideas forward that we implement them in a way [that] will make sense in practical terms and that won't have unintended consequences," Mulino said. "And when it comes to that particular issue of limited recourse borrowing (LRB), what I would say is that that's an issue that's been in the public realm for a very long time. It's been an issue that has been flagged as needing attention. And not everybody has landed on the same position on that issue.
"But I would reflect, for example, on some recent inquiries which have looked at that, including the Murray Review, which landed on a position of saying that it wasn't appropriate for that kind of borrowing to occur in the super context, given that super should be primarily about building assets for somebody's financial sustainability and retirement," he continued. "I understand this is an issue where there's a range of views, and we will certainly consult on the way that we implement it."
"We see AI now across so many portfolios. It's really important to have that central function that draws all those strands together," Mulino said. "We see huge opportunities from AI, for example, in the rollout of data centers. We see AI now having significant productivity impacts in a wide range of areas, including financial services. But we also see a number of challenges and risks that we need to navigate along the way. So that includes, for example, with data centres. Yes, they'll create a lot of jobs; they'll create more opportunities for data sovereignty and all the industries that hang off those data centres. But we need to make sure we get permission from communities when it comes to issues like land use, water, energy issues and so forth.
"There are huge opportunities for projects, productivity gains from AI. But we need to manage a range of issues, such as privacy and copyright," he continued. "And so, I think, what bringing that into one central focus acknowledges is that there's a huge opportunity. But we need to make sure that we have visibility of the way all these different issues are being managed across all these different portfolios.
"We are appropriately managing all of the different risks that exist alongside the massive opportunities now when it comes to financial services," Mulino added. "I'm already seeing AI being used in all sorts of positive ways. It's being used by brokers, by people providing credit, by people looking to manage cyber and scam risk. AI is being used in a range of incredibly productive ways already."
"Scams are an issue which we're very focused on from a regulatory perspective," Mulino said. "What I'd say about cyber and scams is that we're seeing AI in a sense on both sides of the equation. So we're seeing AI being used increasingly by the perpetrator of the problematic activity. But we're also seeing AI being used increasingly to protect consumers, both by the financial sector organisations or the advisers, but also by regulators. And so we're in a little bit of a competition, if you will, making sure that the use of AI by the organizations acting on behalf of consumers and the regulators is at least as advanced and effective as the AI being used by the perpetrators.
"I think in terms of how brokers, but also other parts of the financial services sector, can work best with government is that we need to make sure we fully understand the ways in which you're using AI, in which AI can be used to protect from risk, but also to understand from your perspective how these risks are materializing," he continued. "This is something where we need to make sure that in that broader ecosystem that when it comes to these ever more sophisticated challenges and risks, that industry and government work closely together to make sure that we make our system as a whole as resilient as possible."
