The prospect of a recession in Australia was the focus of a recent conversation between ANZ Chief Executive Shayne Elliott and radio host Neil Mitchell on 3AW. With rising interest rates and inflation concerns, Elliott acknowledged that "we are in for a period of further pain" as the Reserve Bank attempts to manage economic heat by increasing interest rates.
While Elliott conceded that recession is possible, he expressed confidence in Australia's economic resilience due to strong employment levels and high savings. He noted, "I don’t think it likely we will have a recession," attributing this to Australia's robust trade performance and consumer confidence.
Mitchell raised concerns about housing stress, referencing figures from the Finance Brokers Association indicating distress among Victorian homeowners. Elliott countered these claims, stating, "those numbers are extraordinarily low still," with only 0.5% of Australians unable to keep up with home loan payments over three months.
The discussion also touched on interest rate buffers implemented during the COVID-19 pandemic when loans were issued at historically low rates. Elliott confirmed that these buffers have been effective: "the buffer has worked very well." However, he acknowledged potential challenges ahead as fixed-rate periods end for some borrowers.
Elliott addressed upcoming interest rate increases and their impact on consumers' spending power. He explained that such moves by the Reserve Bank are part of efforts to curb inflation: "They’re trying to say to people – stop spending."
As prices continue to rise, particularly in areas like energy costs, Mitchell questioned whether further price hikes could be expected. Elliott provided insights into global factors influencing Australian inflation but remained uncertain about future trends across all sectors.
When asked about wage increases potentially fueling inflationary pressures, Elliott recognized both positive aspects and risks associated with higher wages leading to increased costs for businesses.
Concluding their conversation, Mitchell queried ANZ's stance on long-term mortgage loans. While acknowledging standard 30-year mortgages exist within ANZ's offerings, Elliott dismissed any notion of extending terms beyond this duration: "No...we would have many people who have a 30-year mortgage."