Moore predicts a soft economic landing as his former bank, Macquarie backs carbon emitters

Ex-banker Nicholas Moore has told a summit the Australian economy will have a soft landing while his former bank, Macquarie, backs its carbon-emitting clients.

Former Macquarie Group boss Nicholas Moore says he expects Australia’s economy to have a “soft landing” after the Reserve Bank of Australia on Tuesday raised rates for the 12th time in just over 12 months.

Australia, like economies across the world, is grappling with record high inflation and Mr Moore told guests at the Morgan Stanley Australia Summit that it might be “stickier” here than in other countries.

“A soft landing is more likely than not,” Mr Moore said.

“There’s a lot of stimulus that’s still in people’s bank accounts. There is still a lot of cash available. We’ve got a lot of people coming into the country. We’ve got a lot of housing that needs to be built.”

Housing represents a significant challenge for Australia, he added, commenting that in the US rents were coming down – which was not the case here. The latest Australian government data showed rental affordability fell in all states and territories, except the ACT,

“Fewer people can own their houses today than 20 to 30 years ago,” Mr Moore said. “Rent is a real question in terms of affordability.

Macquarie chief executive Shemara Wikramanayake and her predecessor, Nicolas Moore.

“We have 400,000 people coming to Australia and we are not building enough. It’s up to the federal government of course through local governments, and state governments, but it’s a massive issue in terms of our society.”

Housing affordability is also crunching homeowners. Paying off a mortgage in Australia’s two largest property markets is tougher than at any time this century, according to the Real Estate Institute of Australia.

The housing affordability crisis is somewhat of a challenge for his former firm Macquarie Bank, which is on the lookout for new ways to keep driving its stellar earnings.

Australia’s biggest investment bank has a smaller exposure to real estate than in times past, although it still has direct investments held in its assets under management unit, exposure through its mortgage book as a retail lender, and as an investment banker advising on real estate deals.

Last month, Macquarie posted a 10 per cent increase in net profit in the 12 months ended March 31, to a record $5.2bn, underpinned by strong momentum in its commodities and markets unit.

Despite this, its shares fell as the market questioned how long its earnings growth trajectory could continue in a tougher operating climate, where many central banks are still increasing interest rates.

Macquarie Group chief financial officer Alex Harvey.

Macquarie Group chief financial officer Alex Harvey said there were “concerns” about segments of the real estate sector but pointed to opportunities in renewable energy, digitisation and digital infrastructure.

Macquarie has been called out for committing to net zero carbon emissions by 2050 and yet still continuing to finance a number of heavy emitting companies.

Mr Harvey said it was “important” to invest in the transition to a carbon-neutral environment.

“It’s important that economies invest in that transition, and that investment really requires us to work with, invest in, and support our clients who are currently heavy carbon emitters,” Mr Harvey said.

“This exercise we’re going through – the transition from heavy conventional use, commercial energy use or heavy emission industries to renewable industries – is a massive change for the world. It’s a gigantic change.

“And in order to make that happen, you know, the most heavy emission companies obviously need the investment they need support to help them decarbonise their activities.”

The CFO pointed to the star-performing commodities business, adding that these clients were often “very heavy emitters” and that the bank was focused on carving out a role in helping them transition.

“The idea of actually supporting heavy emissions industries today as they make that transition, actually working with them to develop those capabilities, is very consistent with our strategy,” he said.

Originally published as Moore predicts a soft economic landing as his former bank, Macquarie backs carbon emitters