Rates not likely to move higher, says CBA’s Matt Comyn

The nation’s largest lender does not expect the RBA to raise rates any higher, and supports stage three tax cuts amid inflationary concerns.

Immigration is providing a tailwind to the economy, says CBA CEO Matt Comyn. Picture: Jane Dempster/The Australian

Commonwealth Bank boss Matt Comyn sees interest rates staying higher for longer, but does not expect the Reserve Bank to hike again this cycle.

Speaking to The Australian after handing down the lender’s quarterly numbers, which showed a 5 per cent slide in cash profit, Mr Comyn pointed to the challenges facing households in the cost-of-living crisis, as he maintained his support for the upcoming stage three tax cuts, due to come into force in July.

“I think it’s more likely that rates are on hold this calendar year. I don’t think you can rule out a rate increase, but I think it’s unlikely based on everything we’re seeing,” Mr Comyn told The Australian.

“The market has priced in that rates are likely on hold until next calendar year but, as we’ve seen, expectations can move quite quickly based on the economic data.”

The March quarter inflation reading saw prices rising 1 per cent over the three months for a gain of 3.6 per cent over the year.

Following the higher-than-anticipated inflation print, which had some economists raising the alarm for another round of rate hikes, the Reserve Bank this week kept the official cash rate on hold – but said it had considered a move up. The cash rate currently stands at a more than 12-year high of 4.35 per cent.

RBA governor Michele Bullock in a press conference following the decision confirmed that the board considered lifting rates this month but said its policy outlook was “neutral”.

The central bank now sees inflation rising to 3.8 per cent in June.

The stubbornly high inflation has added to the pressures facing the Federal Government as it prepares to hand down its third budget on Tuesday, with economists calling for restraint and some arguing the legislated stage three tax cuts to be delayed.

As worries grow on the inflation and rates outlook, Mr Comyn maintained his support for the stage three tax cuts and said he wasn’t overly concerned about the inflationary prospects of the upcoming budget.

“We’ll have to wait and see the budget papers and have the opportunity to read through those but I know the treasurer is weighing up all of the issues and how to help people with cost of living and is very conscious of that in the broader context,” Mr Comyn said.

The nation’s largest lender on Thursday posted an unaudited cash profit of $2.4bn for the third quarter, down 5 per cent on the prior corresponding period as competition crimped margins, with arrears ticking higher through the three-month period.

Acknowledging the pick up in late payments across personal loans, home loans and credit cards over the quarter, Mr Comyn said they were not necessarily a concern but more a sign of the reality households were facing.

“We’re very conscious of the pressures that many households will be dealing with due to higher rates over the course of this year,” he noted.

“Many households and small businesses undoubtedly would be looking forward to the prospect of a reduction in interest rates. And I do think over the course of the rest of this year, clearly it will become more evident about precisely when that is likely (to occur).

“While the most recent CPI data was a little higher than we would have liked, this is one piece of data and it’s important not to overreact. There are uncertainties, clearly, on the exact pace by which inflation returns to the target band and this is an issue being watched both in Australia and internationally.”

With the majority of households still on top of repayments following the steepest rise in interest rates in decades, Mr Comyn said fears of widespread defaults had not evenutated in part due to strength in the jobs market.

“Unemployment has remained very low, the jobs market has been very robust. And that has highlighted the resilience of the economy.

“Secondly, there was a lot of stimulus through the COVID period ... and a number of people were able to increase substantially their savings balances, and that’s true for households and businesses.”

Home loan arrears increased through the quarter to 0.61 per cent, up 9 basis points, as borrowers struggled with higher rates, while credit card arrears also lifted 8 basis points. Personal loan arrears jumped 20 basis points and at 1.34 per cent are above the long-term average.

Mr Comyn expects arrears to lift further over the course of the year.

CBA shares closed down 2.2 per cent at $117.09