REID Our chief executive has been very vocal lately with the view that all these factors have contributed to an overly risk-averse attitude to lending that has had an impact on credit growth – at least this is certainly the case at ANZ.

The changes to macroprudential policy, along with other factors, are supportive of credit growth. Another factor is banks simply getting a better handle on the changing environment for consumer lending in particular. Our view is that the market is off the bottom, and I believe we are forecasting 2-4 per cent annual credit growth.

It is not going to be a v-shaped recovery, though. We have been through a pretty painful period of adjustment and although we should be in better shape going forward I don’t think we are expecting to return to the higher growth levels we experienced, not recently but in the not-too-distant past.

BLACKSTOCK Part of the issue for us has been the adjustment itself – getting the machine used to the new requirements. Going through the process undoubtedly slowed us down, but I’d say we are probably through that period now.

The relaxation of macroprudential rules in isolation might not be a material issue. But in combination with all the other things that are going on – including tax rebates, interest-rate cuts and more affordable house prices – it should, I think, go a long way towards making credit growth pick up from its lowest levels.

I actually don’t think low credit growth has been a supply story, at least not in recent history. It is more of a demand issue. As for the outlook, I echo Simon Reid’s comments. I believe our economists are forecasting housing credit growth to accelerate modestly to 4.5 per cent in 2020 from 3.5 per cent in 2019.

MITCHELL The point about infrastructure is a very important one. Banks have had a number of focus points that have required significant change to be implemented, including the ongoing regulatory change agenda and the recent royal commission. Resources have been stretched.

Coming out of this cycle, I think we will have become more mature in the way we deal with the relevant challenges and will also be able to have a renewed focus on the business.

BLACKSTOCK We have to fund what we see – we don’t want to get ahead of growth. The other big issue for us is that it isn’t just about credit growth in isolation but instead is about credit growth in relation to deposit growth.

MITCHELL I agree. We certainly wouldn’t want to be funding for a sharp turnaround in growth until we have seen it happening for a considerable period of time.

BISCHOFF When we were in a period of 6 per cent credit growth we were naturally more proactive about funding in advance, because the growth was flowing through to the book. When growth is at 2.5 per cent – we forecast it to edge up to 3 per cent next year – we just have to be more considered about the funding side.

When growth is subdued, issues like Australian rate cuts and a lower currency have a more powerful impact on the funding task. I think this is clear in how all the banks have behaved in the past six months. There has been a pretty considerable drop-off in the volume of funding we have all done in wholesale markets. Hopefully this will change in time, because it is a good time to fund credit growth in the markets. But I certainly disagree with the idea that the banks have not been willing to supply credit.

BLACKSTOCK I think it’s certainly possible to make a case for this. Low rates should help credit growth pick up while at the same time deposits are not as attractive as they used to be. However, we haven’t seen this so far. We have to base our approach on how we see the balance sheet reacting, and to date credit growth is still being funded by deposits.

BISCHOFF I would go a step further. What we’ve seen in the Eurozone and Japan, and in the US when rates were very low, has been deposit growth consistently outstripping household-credit growth.

This has been the case in the Eurozone for the entire period that rates have been negative, for instance. It’s a false impression to think that low rates in and of themselves persuade people to take on more risk. Other factors need to be in play – for instance government policy and the broader environment – to encourage risk taking.

BLACKSTOCK Supply is another issue in the housing market. We have seen a reasonable pickup in housing-finance applications but we aren’t seeing a pickup in supply of housing. The applications are not necessarily translating into people buying houses because there isn’t an equivalent number of sellers.

BLACKSTOCK I think it is. The other question is where we are in the rate-cutting cycle – are we going to get more cuts? The market suggests we are, and this expectation might be creating some uncertainty and fear in the consumer and business sectors. It could be making potential borrowers stay their hands, in other words, while they wait for things to become even more attractive.

REID I think some people – including me – have been surprised by the apparent impact of the rate cuts on confidence. It is certainly good to see signs of improving confidence, which I think comes down to a growing understanding that the RBA is being proactive.

Our rates might suggest Australia is in a crisis scenario. But we are not – this is still a good place to be and in fact it is a good time to buy a home. It takes time for borrowers to think all this through, but there should be a positive impact as they get used to the idea of lower rates and what this really means for their ability to finance investments.