wage stagnation
Business Council chair Jennifer Westacott. (Image: AAP/Mick Tsikas)

The Australian Prudential Regulation Authority's removal yesterday of its cap on interest-only mortgage lending confirms just how concerned financial regulators are about the big banks' new-found conservatism in lending, courtesy of the royal commission -- especially given reports the Reserve Bank has been urging the banks not to tighten lending too much. Tighter lending when residential construction and investment forecasts are being written down and the global economy is weakening poses a significant threat to the local economy. And all the more so when household consumption forecasts have also been written down due to continuing wage stagnation, into its sixth year without any policy response from the government.

That leaves the economy, which appeared to be gathering strength mid-year, ending the year facing challenges from post-royal commission tighter lending and wage stagnation.