The EOFY Roundup

Good Morning and Welcome to the end of FY 20!

I know that many of my accounting partners will be bleary eyed as they wash up the end of this FY. It sure has been a crazy one for them, with COVID-19, job keeper and the other myriad of what could be termed poorly delivered government initiatives.

Possibly the biggest news of the money week was the decision from the federal court to uphold the decision previously made arounds ASIC’s responsible lending appeal. In short ASIC alleged that Westpac failed to meet obligations under the NCCP, by using HEM (Household Expenditure Measure)

Westpac were not separately assessing an individuals declared living expenses, they were using a 70% rule. Meaning that if a customers expenses exceeded 70% of monthly income that they would carry out ‘belt tightening’ of their own accord, so by reducing their own discretionary expenses.

I would tend to agree with Justices Jacqueline Gleeson and Michael Lee here. In my experience and that of assisting clients over the years it is very rarely a home loan that gets a client into trouble. In fact it is the first thing that most clients tend ‘fan their water to’. In most cases the things that cause clients to fail in their repayment obligations are things like credit cards, payday lending and gambling.

In what could be seen to be a juxtaposed position, the council of financial regulators (made up of ASIC, APRA and the RBA) in their quarterly statement, have said that lenders should be using their significant capital positions to facilitate a continued flow of credit to households and business’.

I wholeheartedly agree here as there are many business out there who could do with a capital injection to keep them growing and diversifying, I meet with them everyday. The largest gap I see is where a client is unable to borrow, when they have a strong plan of action but no security to borrow against.

Hopefully banks like Judo Bank and some of the other NEO lenders will be able to start to fill this gap.

I hope this new FY brings much prosperity to all!

JC

Scenarios and interest rates quoted above are suggestions and constitute general advice only.