Australia-China to ‘iron out’ relationship over time, says NAB boss Ross McEwan

Australia-China relations ‘incredibly important for business’, says NAB boss.

National Australia Bank chief executive Ross McEwan has expressed confidence that China and Australia will repair and rebuild their fractured relationship. Picture: Stuart McEvoy

National Australia Bank chief executive Ross McEwan has expressed confidence that China and Australia will repair and rebuild their fractured relationship over the longer-term, given the financial benefits to both markets.

Speaking at a Bloomberg virtual conference on Monday, Mr McEwan also said the most likely shape of the global economic recovery would be a “W”, as parts of the world endured second waves of COVID-19 infection.

He labelled Australia-China relations as “incredibly important for business”, suggesting differences would be ironed out over time.

“It’s been a big source of income for Australia and obviously for China as well,” Mr McEwan said.

“At the moment these relationships are being tested. Our view is that over the long term these relationships will build again. They’ve been very, very strong for decades and the relationships are important to both countries, and they are being tested at the moment, but I’m sure that we’ll be able to work our way through it.”

Australia’s relations and trade with China have become strained during the pandemic, particularly after Prime Minister Scott Morrison pushed for an international probe into the origins of COVID-19.

Last week, Mr Morrison said the nation had been suffering from a spike in state-sponsored cyber attacks, which have since been linked to China.

Mr McEwan said it was important for Australian businesses operating in China that bilateral relations improved.

Support customers trading in China

“From a banking perspective, our ambition is to support our customers who are trading in China and vice versa,” he added.

Mr McEwan also highlighted the speed at which COVID-19 had hit the local economy, making it different to downturns, including the global financial crisis.

“The crisis that we had from 2007 through is quite different to the crisis we are experiencing here... It’s (the pandemic) hit so many businesses so quickly because economies closed down effectively people couldn’t move, we couldn’t travel, all the tourism stopped, so this happened so quickly.

“Now is the time to look after a balance sheet of a bank and while everybody is still worried about profit and loss, which is still important, I think the balance sheet is the thing that we should all be concentrating on.”

NAB slashed its interim dividend and tapped investors for $3.5bn in capital raising in April, as part of a plan to shore up its balance sheet.

At the time, the bank outlined expectations that the Australian economy would not return to pre-COVID-19 levels of economic output until early 2022.

Interest rate cuts, negative rates

Asked on Monday about the Reserve Bank’s interest rate cuts and whether a move to negative rates would help the economy, Mr McEwan said he didn’t think that lever was necessary.

“It could happen but I don’t see it... there are other mechanisms that can be used to stimulate an economy,” he added, citing his time in Europe for helping to firm his opinion.

Mr McEwan reiterated that some NAB customers would not survive the economic turmoil, as the federal government reined in stimulus measures.

“If you had a struggling business going into this crisis, it’s very unlikely it will survive, or go well going through it, so therefore you need different strategies,” he said.

Mr McEwan also pointed to a challenging period ahead for the local banking industry in the short-to-medium term.

“There will be a less profitable banking sector in Australia,” he said.

As a group, the big four banks have set aside almost $5bn for COVID-19 loan losses as the nation navigates its first recession in almost three decades.

In April, Mr McEwan said his plan for NAB include simplification, faster decision-making, more accountability and keeping a lid on costs.