Australia on Friday said it would simplify bank lending rules to free up credit in a bid to stimulate the economy, which slid into its first recession in nearly 30 years due to the coronavirus pandemic.
The changes will ease the regulatory burden and reduce the cost and time faced by consumers and small businesses seeking to access credit, Federal Treasurer Josh Frydenberg said.
“The flow of credit will be absolutely critical to our economic recovery,” Frydenberg told reporters in Canberra.
“But our current regulatory framework, with respect to lending, is not fit for the purpose. It has become overly prescriptive, and responsible lending has become restrictive lending.”
Though credit is cheap now with interest rates at record lows, consumers have found it more difficult to obtain the loans they seek, with many giving up due to tough lending laws.
“We need our banks to be extending credit, we need the regulation to be streamlined, and we need customers to be able to access credit,” the treasurer said.
The coronavirus pandemic has taken a heavy toll on Australia’s economy. To cushion the blow, the conservative federal government has relaxed several rules for businesses and rolled out stimulus packages worth about 314 billion Australian dollars ($221bn).
The latest decision to overhaul the credit rules comes a day after Australia unveiled its biggest shake up in bankruptcy laws in nearly 30 years, allowing small businesses to trade while insolvent and take more control over debt restructuring.