Another credit crunch could be on the horizon if banks scale back their asset growth too much, according to NAB boss John Stewart.
Mr Stewart made the comment at the 2020 Summit in Canberra, saying while banks needed to take precautions in the current economic environment, there was a danger a sharp slowdown in lending would cause problems for the financial system.
He likened the effects of a deliberate lending slowdown to the tightening in monetary policy by the Reserve Bank of Australia.
"If a bank slows up on its lending, you don't notice it very quickly but six months later it's really hard to get a loan," the NAB chief said.
The bank's chairman, Michael Chaney, who was also attending the summit, claimed it was clear the RBA's recent round of interest rate rises was starting to have an impact on the banking sector's business and that he’d be surprised to see any further hikes.
However, Mr Chaney doesn’t expect consumer demand to return to pre-March levels any time soon.
"I think we'll see as we roll forward, if demand stays subdued that the regulatory authorities and the Reserve Bank will take some action to stimulate it,” he said.
He likened the effects of a deliberate lending slowdown to the tightening in monetary policy by the Reserve Bank of Australia.
"If a bank slows up on its lending, you don't notice it very quickly but six months later it's really hard to get a loan," the NAB chief said.
The bank's chairman, Michael Chaney, who was also attending the summit, claimed it was clear the RBA's recent round of interest rate rises was starting to have an impact on the banking sector's business and that he’d be surprised to see any further hikes.
However, Mr Chaney doesn’t expect consumer demand to return to pre-March levels any time soon.
"I think we'll see as we roll forward, if demand stays subdued that the regulatory authorities and the Reserve Bank will take some action to stimulate it,” he said.
