ANZ fears complacency
ANZ chief executive Shayne Elliott says Australian households are entering uncertain times in “unbelievably good shape” but that complacency brought on by the idea of being the “lucky country” was a threat.
Assessing the Reserve Bank’s interest rate rises since May, Mr Elliott said the central bank had a “wickedly complex” task in trying to alter people’s behaviour in real time with interest rates, which are a tool that takes time to work.
Speaking at the American Chamber of Commerce lunch in Melbourne on Friday, the ANZ boss agreed Australia was entering uncertain times but said it was doing so from a position of strength, which made the chances of a recession slim.
“On average Australian households, small businesses and other businesses are entering a period of uncertainty in unbelievably good shape,” Mr Elliott told the business lunch.
“And if you were to say we were entering a world of uncertainty, high inflation and geopolitical risk and design a system, design what household balance sheets should look like … then we are entering that in really, really good shape.”
The RBA has lifted interest rates four times since May to help put downward pressure on rampant inflation, but this has raised fears it could plunge the economy into a recession if the belt tightening goes too far.
Mr Elliott, however, said the chance of a recession was “extraordinarily low”.
“People have jobs, people have money ... it’s possible but extraordinarily unlikely,” he said.
The threat of complacency in Australia was a different matter, however.
“I worry that this ‘lucky country’ idea – which is true, it has been extraordinarily fortunate – sometimes makes it easier to walk away from those very hard decisions, and you think about reform, or the lack of it over the last 10 or 15 years, those things I worry about,” he said.
Mr Elliott shared some sympathy with the hard task ahead for the RBA as it tried to understand and react to realtime events that were moving incredibly quickly, which made its job complex.
“Change is happening at a fast rate. The difficulty that the Reserve Bank has is trying to set a rate to change all of our behaviour, trying to take money out of our pockets; the problem is it doesn’t happen in real time.
“It’s not like you change rates and tomorrow morning we all change our behaviour.
“So the RBA raises rates, they see the data, inflation keeps going up, so they raise it again. So they are forced into a really short-term cycle of decision and the risk is the impact they are having is delayed and they overload … so it’s a mismatch between action and outcome.
“It is wickedly complex.”