Solutions That Beat A Home Loan Squeeze

from Philip Eliason, chief executive officer, Real Estate Institute of Australia.

Next week's round of meetings between banks and the Reserve Bank of Australia are likely to miss the point about home lending.

Yes, they will review current housing data and this may be enough to stop the RBA clamping down on home loans. The minimal contribution of the housing sector to inflation is further reason.

Until equally effective and well understood saving alternatives exist, the family home will continue to dominate household investment choice.

If the RBA believes housing crowds out business investment, then spending can be rebalanced not by steps aired by the RBA, but by: improvement in comparability between bank interest rate and charging data to heighten competition between banks; better financial risk management education for lenders and especially small business borrowers; lowering indirect costs of finance used for investment such as taxes and charges levied on business expansion; and decoupling of personal loans from home equity through constraint on credit as the RBA would apply to housing.

Making finance for home lending harder to obtain is not the answer; promoting competition, choice and saving is more effective.

Philip Eliason, Deakin, ACT.