WHETTON What the Reserve Bank of Australia, the council of financial regulators and the Australian Prudential Regulation Authority say about financial stability is not going to change on a dime. I cannot see the RBA endorsing a policy about competition to provide credit at the expense of stability.

The pendulum hasn’t swung too far the other way yet but the atmospherics are not good in the housing market and one of the reasons is the availability of credit. There was too much for a while. At the moment I don’t think we have too little but we probably can’t afford to tighten much further.

The balance in the regulatory system is right. The banks are more stable than they were and are now able to weather a downturn thanks to the capital requirements that are largely in place. The regulator has been very effective in this. It is important not to introduce too many new things that may bring unintended consequences.

GOODMAN For a while the political class was talking about the stability of the financial system in Australia as something to be proud of. This has changed recently. This is not to say that any of the failings that have come out in the royal commission are good, of course.

STANLEY I think it comes back to what we were discussing earlier, which is that we haven’t had a big debt-funded capex cycle. If and when we get that cycle, it follows that credit supply would increase a lot in the nonfinancial corporate sector because banks have had to deal with the capital increase and repricing that have occurred for regulatory reasons.

GOODMAN I agree, and I would add that 2017 is probably not a good benchmark to measure from. It was an outlier, while 2018 was also a low refinancing year. Perhaps we should have come in expecting less issuance.

BROWN There have been some changes in the way the corporate loan market is operating. Foreign banks are making far more aggressive loans.

STANLEY Especially in corporate property.

BROWN Supply in other parts of the credit market, like listed credit, just isn’t going to come through while the loan route is available.

WHETTON This is bread and butter for the major banks. Because they do transaction banking, they subsidise corporate loans via their home-loan books. Some recent deals have been printed at very skinny levels versus where banks have been able to raise funding themselves.

If the accessibility of this credit for corporates ever changes in relation to banks’ funding margin, perhaps borrowers will go to the capital market instead.

Corporates need political stability as well. Certainty is lacking throughout the world. If companies felt like they could take on 10-year borrowing because they have certainty about energy policy, for example, they might be more inclined to undertake capex.