Wayne Byres, Chairman - Senate Economics Legislation Committee, Canberra
In the interest of time, I will only make a very short opening statement. I'll start with a couple of comments on our efforts to reinforce sound standards in lending for housing. This effort has consumed a great deal of our supervisory time over the past three months, but is now starting to bear fruit.
Given the current environment, Australian ADIs - and particularly the largest lenders - have acknowledged the need for collective action to ensure Australian housing loan portfolios remain low risk and a key source of stability for the banking system as a whole. So, with our encouragement, we've seen the removal of some lending practices which were, to be frank, less than prudent, and some scaling back in growth aspirations to more moderate levels. The effects of this are only now beginning to be observed, and will take time to fully flow through. To that end, we will be watching carefully over the remainder of the year to make sure that revised policies and plans are genuinely being put into effect and maintained by individual lenders.
Our work has often been described as 'macro prudential', but we see it as very much 'bread and butter supervision' activity. As I have said previously, our success will not be judged by changes in house prices. They are not within our mandate, and in any event there are too many influences on house prices that are beyond our control. Our goal is simpler: that, regardless of the path of house prices, interest rates and broader economic activity, the loan books of Australian ADIs are built on solid foundations from sound lending standards.
I would also like to quickly comment on private health insurance. As you know, the Government recently introduced a number of bills into Parliament to transfer responsibility for the prudential supervision of private health insurance from the Private Health Insurance Administration Council (PHIAC) to APRA. From our perspective, APRA and PHIAC staff have actively engaged for much of the past year to prepare for this transfer. I am pleased to report that both agencies are ready to deliver a seamless and effective transfer of responsibilities on 1 July. We therefore regard it as quite important that this package of legislation is passed by Parliament this month to ensure the momentum and preparation for this change is not lost.
Finally, I'd like to note that this will be the last appearance before this Committee by my colleague, Ian Laughlin. Ian is reaching the end of his five year term as a Member of APRA, the last two as Deputy Chair. During his time with us, we've benefited greatly from his wisdom and extensive industry experience, and I would like to take this opportunity to publicly acknowledge his significant contribution to APRA's performance.
My colleagues and I would now be happy to take your questions.