ANZ boss Shayne Elliott says it is unlikely Australia will dip into a recession with household balance sheets very strong

Shayne Elliott says households are in ‘unbelievable good shape’ but Australia must be wary of resting on its ‘lucky country’ status.

ANZ CEO Shayne Elliott says it is ‘extraordinarily unlikely’ Australia will fall into a recession. Picture: Josh Woning

ANZ chief executive Shayne Elliott says households are entering uncertain times in “unbelievably good shape” with strong household balance sheets, but warned Australia to be wary of complacency brought on by clinging to the idea of a “Lucky Country”.

Assessing the recent performance of the Reserve Bank and its string of interest rate rises since May, Mr Elliott added the central bank had a “wickedly complex” task ahead of it as it attempted to alter people’s behaviour with rate rises in real time.

Speaking at the American Chamber of Commerce lunch in Melbourne on Friday the ANZ boss was asked about the upcoming federal government’s jobs summit, to which he quipped that given labour shortages a workers’ summit might be better.

“I’m not giving any advice, but I’m not sure we need a jobs summit as much as a workers’ summit, we have got the jobs but we need people to fill them,” he said.

On the economic outlook amid rising interest rates, soaring inflation and other pressures on the economy flowing from geopolitical and health issues, Mr Elliott agreed Australia was entering uncertain times but it was doing so from a position of strength – which made recession unlikely.

“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 on Friday.

“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 Australian economy into a recession if the belt tightening goes too far.

ANZ chief Shayne Elliott says it is feeling optimistic about its takeover of Suncorp’s banking arm. Photograph by Arsineh Houspian

He said the chance of a recession in Australia was “extraordinarily low”. “People have jobs, people have money … it’s possible but extraordinarily unlikely,” Mr Elliott told the forum, adding that he remained concerned about the threat of complacency.

“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 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 real-time events that were moving incredibly fast, 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 raise (rates), wait to see the data, inflation is still going up and the economy is still firing, and so they are being forced into a really short-term cycle and the risk is that the impact they are having is delayed and they overhype it and you could argue they overreach,” he said.

“So it’s a mismatch between action and outcome.

“It is wickedly complex.”

Mr Elliott said it was impossible to predict where inflation would be heading, how high it could go, given recent economic settings and the quickly changing landscape.

“It is not that long ago the Reserve Bank of Australia and (Reserve Bank) in New Zealand were saying to banks you need to get ready for negative interest rates. I’m not talking about five years ago, I am talking about a year and half ago that we were being told it and we were being briefed and nobody knew, how does that work, negative interest rates, because inflation was so low.

“That was only a year ago, and now we’re talking about record levels of inflation,” Mr Elliott said.

Mr Elliott said he was feeling very optimistic about the competition regulator approving the bank’s $4.9bn bid for Suncorp’s banking arm, saying that after the deal it wouldn’t be the biggest bank in Suncorp’s Queensland home state and that its combination would also provide stronger competition in the state.

He said he felt confident ANZ would get a fair hearing from the Australian Competition and Consumer Commission over its deal.