CANBERRA, Sept. 25 (Xinhua) -- The Australian government has announced that it would abolish lending laws imposed on banks during the global financial crisis (GFC) to increase the flow of credit.
Treasurer Josh Frydenberg announced on Friday that the government would transfer due diligence obligations for loans from lenders to borrowers, effectively dumping responsible lending laws introduced in 2009 and injecting an "adrenaline shot" into the economy.
Under the changes, lenders will no longer be penalized if borrowers provide misleading information on their loan applications, speeding up the credit approval process as Australia endures its first recession in 29 years.
"The Morrison government is implementing the most significant reforms to Australia's credit framework in a decade to increase the flow of credit to households and businesses, reduce red tape and strengthen protections for vulnerable consumers," Frydenberg said in a statement.
"As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses."
"By simplifying the loan application process for borrowers it will reduce barriers to switching between credit providers, encouraging consumers to seek out a better deal."
"Maintaining the free flow of credit through the economy is critical to Australia's economic recovery plan."
According to the Treasurer, households and businesses will have access to 130 billion Australian dollars (91.6 billion U.S. dollars) in new credit each month.
The new system will also include greater protections for low-income owners and welfare recipients who are vulnerable to extortionist conditions from payday lenders.
Frydenberg's announcement comes after the Reserve Bank of Australia (RBA), the nation's central bank, warned of a credit freeze with banks too scared to lend during the COVID-19 pandemic.
The proposed reforms, which will need to be legislated in Parliament, have been welcomed by the banks but slammed by consumer advocates who say they will burden more Australians with debt they cannot afford.
"We got rid of the idea of 'buyer beware' in consumer law decades ago," Alan Kirkland, chief executive of leading consumer advocacy group CHOICE, told Nine Entertainment newspapers.
"To make it the principle that guides lending in the middle of a recession has disaster written all over it.
"Piling more debt onto people who can't afford it has never solved an economic crisis."