Macquarie boss says immigration will shield Australia’s economy

Macquarie Group boss Shemara Wikramanayake says Australia’s rebound in immigration and its natural resource endowments put the nation in a better position than other economies to weather a coming slump caused by rising interest rates and inflation.

Speaking to investors in Sydney on Tuesday before a surprise rise in interest rates, Wikramanayake said the market expected a “material” slowdown in Europe and America as central banks sought to rein in inflation, and Australia was not immune to the trend.

Macquarie chief executive Shemara Wikramanayake.Credit: Michael Quelch

“In Australia as well, the inflation persists, and we are going to have to take action to slow the economy as part of reining that in,” she said at the Macquarie Australia Conference.

Even so, Wikramanayake said Australia’s economy had performed better than many others over the last 25 years, and she argued there were a few key reasons why it would be more resilient this time around as well.

“I think there are a few underlying and structural drivers that impact that, and I think they will also result in our having a milder downturn than big global economies,” Wikramanayake said.

After Wikramanayake’s remarks, the Reserve Bank announced it was raising official interest rates to 3.85 per cent, and said it could increase interest rates further. The change, which was not priced in by financial markets, would increase monthly repayments on an average $500,000 loan by $78, RateCity said.

Some economists worry the RBA is pushing too hard on the brakes, with head of Deloitte Access Economics saying the central bank’s latest hike was unnecessary, and it was playing “recession roulette.” But Wikramanayake said strong immigration and access to natural resources would help to shield the domestic economy.

Macquarie will report its full-year results this Friday.Credit: Bloomberg

“As you all know, immigration has really picked up again. So, that is going to drive underlying growth here, which will shield us a bit from the extent of the downturn that global peers are going to have,” she said.

“We also are blessed with things like access to our own commodities in terms of responding to energy issues, and other natural resources in terms of also renewable energy and what we have in terms of advantages in things like wind and solar.”

Household spending is expected to slow this year after interest rates have surged from 0.1 per cent to 3.85 per cent since last May, but Wikramanayake said Australia’s interest rates were still lower than where they were when Macquarie held its first investor conference in 1998, when the cash rate was 5 per cent.

“So you know, yes it’s impacting households, yes, it’s impacting businesses, but it’s at a level - both the inflation and the interest rate environment here - where we should be a bit more resilient than other economies,” she said.

Macquarie says its Australian investor conference is the largest institutional investor gathering in the region, with more than 100 companies presenting and more than 110 global investors attending the event.

Wikramanayake also highlighted long-term trends that will be discussed at the event, including the rise of artificial intelligence (AI) and machine learning, the surge in investment caused by decarbonisation, and growth in capital invested outside public markets.

Wikramanayake said despite the challenges posed by AI applications such as ChatGPT, such technology also presented big opportunities for investors.

Macquarie will report its full-year results this Friday, and analysts are expecting a result of about $5 billion.

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