House prices in Sydney and Melbourne are falling, and have dipped 13 per cent in Perth since their peak in 2014.
UBS said the best outcome would be for the final report of the banking royal commission, due in February, to be watered down from the hard-hitting interim report that focused on “greed” and poor lending standards across the sector.
If that came to pass, the major banks would be unaffected by the commission’s recommendations and the economy would be unscathed, it said.
But a tougher line from the commission, especially around lending standards, would result in house prices nationally slipping 10 per cent and bank shareholders would probably see dividends clipped.
And if the commission’s recommendations hit a slowing economy, the outcome could be house price falls of up to 30 per cent, a sharp reduction in lending to home buyers and businesses while bank shares could crash 65 per cent.
The impact would force the Reserve Bank to slice the official cash rate to zero. It is currently 1.5 per cent. Banks would also face a string of class actions as former customers sue them because of their lending practices.
The research comes as WA Labor MPs and senators call on Prime Minister Scott Morrison to extend the banking royal commission so it can sit in Perth.
The commission, which will have its final sittings in Sydney and Melbourne this month, has yet to head to WA to take evidence from banking victims.
The Labor MPs said it was unfair that WA people had been unable to give their stories directly to the commission.
“This has meant that WA victims have not had the chance to tell their stories in person to the commissioner without having to travel to Melbourne, Darwin or Brisbane,” they said.
Source: Perth Now