ANZ believe that the latest round of......>

AUSTRALIA: ANZ believe that the latest round of APRA proposals represent "a

material easing in the credit constraint facing households. In its recent update

to the market, ANZ estimated that household borrowing capacity has been reduced

by about 30% because of the various steps taken by the regulator over a number

of years and last year's focus on the use of HEM. ANZ estimates that the serving

rate floor was responsible for almost a third of this reduction. The use of a

floor won't disappear, but it seems reasonable to think it will come down some

way from the current 7.25% used by the major banks. Certainly to something with

a 6 handle on it. This is an effective easing in policy settings, in our view.

The RBA Governor is set to speak early this afternoon on The Economic Outlook

and Monetary Policy. It seems reasonable to expect the change proposed by APRA

will merit a comment in his speech. It is possible that APRA's policy change is

seen as lessening the need for near-term interest rates. An alternative take is

that the change will enhance the power of a rate cut and so make one more

likely. We'll find out in a few hours which way the Governor leans."