Coronavirus: GDP will contract 10% in March quarter, says CBA CEO Matt Comyn
In the space of a week CBA doubled the size of the hit it expects the economy to take, CEO Matt Comyn reveals.
Commonwealth Bank chief executive Matt Comyn has warned of a 10 per cent contraction in the economy in the March quarter, as Australia weathers a “substantial demand shock” caused by the COVID-19 pandemic.
Mr Comyn said he had revised down his expectations from a week ago, when he expected a 5 per cent or 6 per cent slump in output, given the notable decline the nation’s largest retail bank was seeing in transaction data.
“There is no question there is going to be a substantial demand shock, and you’ve seen that particularly across a number of different sectors,” he told a live-streamed event on Monday.
“It’s (pandemic impact) not something we’ve seen probably since the early 1900s. It’s very different to other economic situations … this is really overlaid with very serious and significant health crisis.”
Travel, tourism education took an early hit in spending, according to CBA data, with a large increase occurring at supermarkets and pharmacies. But Mr Comyn said the slump in spending had now spread more broadly through the retail sector.
He also pointed to consensus forecasts in the US which suggested the June quarter could be harder hit, with expectations there that economic activity could tumble 25 per cent during the three-month period.
Mr Comyn said the banking sector had worked with the federal government and regulators over the weekend to extend a support package of measures for businesses to those with loans of up to $10m, from $3m previously.
This support now extends to 98 per cent of all businesses with a loan from an Australian bank, allowing them to defer repayments for six months.
“We recognise how important businesses are to the economic growth as well as employment prospects,” Mr Comyn added. “It’s really important that employers are standing down employees not letting them go.
45 of 76,000 eligible CBA business customers have opted out of receiving a 6-month loan payment deferral
“When we get through this particular period, which is going to be extremely challenging, we need businesses and core parts of Australian infrastructure to be able to stand up very quickly to be able to participate in the rebound.”
Mr Comyn said just 45 of 76,000 eligible CBA business customers had opted out of receiving a six-month loan payment deferral so far, following the rollout of the initiative earlier this month.
ANZ CEO Shayne Elliott said Australia was still at the “very early stages” of the pandemic’s fallout. Less than 10 per cent of the bank’s 130,000 had been in contact with ANZ about taking up the payment deferral measures.
“It is going to take time for people to digest this,” he said. “Collectively, we are removing the pressure from businesses.”
But Mr Elliott also outlined that banks had to ensure they didn’t “run out of resources” and that they backed companies that were in good shape ahead of the crisis and were likely to return to normal after it passed.
National Australia Bank boss Ross McEwan said he expected the unemployment rate to climb to “shockingly high” levels and for Australia’s economy to take a “very very large” hit to gross domestic product in the June and September quarters.
He said NAB the nation’s largest bank had fielded more than 200,000 inquiries last week, reflecting 8 per cent of its customer base and anticipated that trend would continue in the short-term.
The major banks have been given a reprieve by the banking regulator on meeting their “unquestionably strong” capital requirements in the current climate and the likes of ANZ and NAB were cashed up due to large asset sales over the past two years.
Mr Comyn said given CBA’s surplus capital the bank wouldn’t need to tap global debt markets for “an extended period of time”, even as it navigated the pandemic’s impact. He wouldn’t estimate, though, how much capital the bank may need in the event of a prolonged economic crisis.
Mr Comyn also expressed confidence in the federal government’s starting fiscal position, relative to other markets, going into the COVID-19 crisis.
“Fortunately, the government finances are in excellent shape,” he said, also pouring cold water on questions around whether Australia could confront a health crisis such as that being endured by Italy due to the pandemic.
“The (Australian) data is very different than places like Italy, and a number of others.
“From a health perspective we absolutely need to be focused on reducing the transmission rates.”
Mr Comyn said he had been in constant dialogue with Treasury, the central bank and the banking regulator in recent days and weeks.
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