Banking royal commissioner Kenneth Hayne, it seems, has a great deal to answer for.

If you can believe the recent steady drip of reports, Australia is in the grip of a credit squeeze that can all be sheeted home to the man presiding over one of the most keenly watched inquiries in years.

As public hearings for the next round of public hearings for the royal commission into banking misconduct get underway in Melbourne this morning, a concerted campaign is quietly underway to ensure the inquiry is stopped in its tracks.

Not that it ever went away.

Primarily, the argument put forth last year to ward off the inquiry — that the continued airing of dirty linen will harm the reputation of our banks and consumers ultimately will foot the bill — has been resurrected.

It's a perverse logic. It was the behaviour of our banks that caused the reputational damage, not its exposure.

It also overlooks a fundamental truism; that if the goal of the royal commission was to root out bad behaviour, including irresponsible lending practices, it stands to reason that money should be more difficult to obtain.

It is no coincidence that we have world-record levels of household debt and some of the world's most expensive real estate.

Just give me money

Last week, one of the richest men in the land made an unusual and shocking admission: he'd repeatedly been denied a bank loan.

Tech entrepreneur Christian Beck, reputedly worth $775 million, claimed he was knocked back on a $6 million loan from an unnamed bank or banks, despite offering one of his multi-million dollar properties as collateral.

"It's stupid, it's crazy, I can definitely afford it," he said, labelling the banks as "paranoid".

The knockback was baffling, aside from the obvious question as to why someone worth $775 million would need to borrow $6 million. But the mystery was soon solved by Mr Beck himself with this extraordinary admission: "I did not have a very high level of income in terms of salary.

"The bank won't give it to me because the APRA requirements around serviceability I don't meet."

There you have it. Annoying it might be, but income generally is regarded as a crucial element when it comes to servicing a loan, especially one that goes to high seven digits.

A few days later, Mr Hayne again was in the firing line, this time responsible for a hapless property owner who had taken a $30,000 loss on the sale of a unit in Sydney's inner west. Having bought at the top of the market, he had been forced to sell because he "couldn't afford his mortgage" with a newborn on the way.

"The royal commission has done the west no favours as banks tighten their lending criteria to focus now more than they ever did on serviceability," a real estate agent lamented.

If anything, these examples only serve to underscore the importance and effectiveness of the royal commission. Our banks suddenly have concerns about lending money to people who may have trouble servicing a loan.

You want cash? You'll need a strong credit rating.

Why rates could rise

There is no doubt credit is tighter and pressure is building on interest rates.

The most immediate cause is that those who lend to our banks from offshore have discovered a few concerning weaknesses in our financial system.

Having for years been assured of the rock-solid foundations of Australian lending standards, global wholesale markets have been keenly watching revelations from the royal commission. They now see increased risk. And they are charging accordingly.

The red line in the graph below charts the premium that wholesale lending markets are charging Australian banks. It's now at its highest in more than a decade. The other factor making offshore lenders twitchy is the drop in our housing prices.

Given our banks are glorified building societies with up to 60 per cent of their loan books devoted to mortgages over residential real estate, a sustained drop in housing prices would unsettle foreign lenders.

Our real estate obsession has created another problem. Household debt now is at world-record levels. Combine that with record-low wages growth, and the only way Australians can maintain themselves is by running down savings.

The blue line shows just that; the widening gap between deposits and loans. Put the red and blue lines together and the supply of credit certainly is tightening. Less supply, ultimately, usually results in higher prices. In this case, that means rate hikes.

Banks and regulators under pressure

The royal commission only got across the line last year when several government members threatened to cross the floor.

In the lead up, numerous inquiries — from banking regulator APRA, the competition regulator ACCC and the corporate regulator ASIC — were launched. In each case, glaring failures were exposed.

Last week, the Productivity Commission delivered its final report; a damning assessment that highlighted the lack of competition within the sector and the callous ease with which banks have exploited customers.

As the commission gets underway this morning, we face the prospect of yet another fortnight of gut-wrenching testimony, this time over superannuation. Before the interim report in September, revelations over insurance rip-offs threaten to blow the industry apart.

That raises questions about the regulators, particularly ASIC and APRA, as to why the situation was allowed to get so out of hand. Much of the most damning ammunition for Kenneth Hayne has come from these two bodies, some of it dating back years, as evidenced by the AMP debacles.

Keenly aware about the potential fallout, rather than lift their efforts to rein in the excesses of the financial sector, both organisations instead have been engaged in damage control and image management.

The Hayne royal commission has shone a torch into the dark recesses of the finance sector and, despite such a constrained time-frame, has unearthed enough material in a few months than our regulators have in years.

Transparency is vital for a healthy democracy. A strong financial sector is crucial for economic wellbeing. Those trying to stymie this inquiry are doing the nation a disservice.