RBA says Australian Banks handing out 'too many interest only unaffordable home loans' 

• The Reserve Bank has warned housing loans are outpacing household incomes 
• RBA boss said banks have issued too many loans and are putting economy at risk
• Treasurer Scott Morrison made housing affordability key part of second budget
• Turnbull government has fought off suggestions of reducing tax concessions 

By Australian Associated Press

PUBLISHED: 10:51 +10:00, 5 April 2017 | UPDATED: 11:18 +10:00, 5 April 2017

The Reserve Bank of Australia boss has warned of rising household debt levels with banks across the country handing out 'too many' loans.

In a post-board meeting on Tuesday, RBA governor Phil Lowe said growth in home loans is continuing to outpace growth incomes and is putting the 'future health of the Australian economy at risk'.

Treasurer Scott Morrison has made housing affordability a key component of his second budget to be released on May 9 as house prices in Sydney and Melbourne continue to soar.

In a post-board meeting on Tuesday, RBA governor Phil Lowe warned growth in home loans is continuing to outpace growth incomes and is putting the 'future health of the Australian economy at risk' (stock image)

In a post-board meeting on Tuesday, RBA governor Phil Lowe warned growth in home loans is continuing to outpace growth incomes and is putting the 'future health of the Australian economy at risk' (stock image)

Business leaders, economists and Labor believe reducing tax concessions should be part of the package, such as cutting the capital gains tax discount, to help cool investor-driven housing demands.

However, the government has repeatedly fended off such suggestions.  

Lenders need to ensure that the serviceability metrics that they use are appropriate for current conditions,' Dr Lowe said.

But he also said recently announced banking supervisory measures should help address the risks associated with high and rising levels of indebtedness, while limiting interest-only housing loans in the Australian market will also be a positive development.

The Turnbull government has repeatedly fended off suggestions to reduce tax concessions, such as cutting the capital gains tax discount
Business leaders, economists and Labor believe reducing tax concessions, such as cutting the capital gains tax discount to help cool investor-driven housing demands are needed

What will stay in the budget is the remainder of the government's 10-year business tax cut plan after only getting a reduction for businesses with a turnover up to $50 million passed by the parliament last week.

Prime Minister Malcolm Turnbull and his treasurer have attacked Labor for not saying whether these cuts would remain in place should it win the next election.

Opposition Leader Bill Shorten and shadow treasurer Chris Bowen still want to know how the tax cuts will be paid for before making a decision and what impact the reductions for small and medium-sized businesses will have on the economy.

Under the full plan that would take the corporate tax rate to 25 per cent for all businesses, the government has repeatedly spruiked it would deliver a one per cent dividend for economic growth in a decade's time.

However, government ministers have repeatedly refused to say what impact the cuts that have been passed by the parliament will have. 

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