Industry responds to RBA's decision

by Madison Utley05 Nov 2020

There has been much discussion around whether or not the Reserve Bank of Australia’s (RBA) decision to lower the official cash rate will have a material impact on the country's finance broking industry, with some in the space focusing on the home loan rates sure to be reduced off the back of the announcement and others pointing out the more pressing issues which remain as a drag on lending activity. 

Yanir Yakutiel, CEO of business lender Lumi, yesterday joined the conversation, echoing sentiments previously expressed by Loan Market executive chairman Sam White.

“Whilst [this cut] is symbolic, it’s not impactful,” he said.

“The problem is that lowering interest rates now doesn’t incentivise the banks to lend more.

“The issue in the Australian economy isn’t a waning demand for capital, it’s not even really in the supply side. What we have here is a distribution problem. Lower interest rates, if anything, make it harder for banks to lend profitably at a time we really need to have capital ready and willing to go where needed.”

Yakutiel called on the RBA and ‘team Australia’ to step up and more directly address the distribution issue.

“We need to see good initiatives like the Term Funding Facility extended to non-bank lenders, who are far faster at getting capital into ‘real economy’ (i.e. small and medium size businesses) where it’s going to make an impact,” he said.

To Peter White AM, managing director of the Finance Brokers Association of Australia, the RBA cut seems sure to provide additional support to both the property market and the small business sector – but only if the banks cooperate.

“Banks are not to profit from this; it would be unconscionable in these times for banks to retain any part of a decrease,” White said.  

“Banks must immediately pass the reductions on to existing customers as well as new ones, and unquestionably pass it onto small business owners. Small business needs this assistance during the current time.”