Economy on recovery ‘fast track’, says NAB CEO Ross McEwan

NAB chief executive Ross McEwan has switched to optimism about the pace of the nation’s recovery, saying it’s happening faster than expected.

The recovery is underway, said National Australia Bank chief executive Ross McEwan. Picture: Stuart McEvoy for The Australian.

National Australia Bank chief executive Ross McEwan has switched to optimism about the pace of the nation’s recovery, saying he expects the economy to return to pre-pandemic levels “much earlier” than previously thought.

In a business address on Wednesday, Mr McEwan, who oversees the nation’s biggest business bank, said Australia was working through a recession after an economic contraction in the June quarter.

“But we’re now expecting the economy to get back to pre-Covid levels by late 2021 – it’s a really, really big win,” the NAB boss said.

The uptick was much earlier than the bank’s previous expectation of late 2022 – the bank’s “best case” scenario in its full-year result earlier this month.

A variety of factors had contributed to the improved outlook, including two vaccines showing strong early results, which were likely to be introduced in the new year and help to reopen the global economy.

Business confidence, while still fragile, was back to its highest levels since October 2019, with Victoria’s emergence from a hard lockdown responsible for some large gains.

As restrictions eased, Mr McEwan said NAB’s home state was “definitely bouncing back”, as Melburnians got back to shopping and eating out again.

“It’s early days, but our data shows that in the second week out of lockdown in Victoria, spending on consumption was up 5.4 per cent on the same week in 2019,” he said.

“This quarter, we’re already expecting a strong rebound in consumption.

“Retail sales are up 5.7 per cent in the quarter, which would add more than 1 percentage point to GDP.”

While pent-up demand explained some of the heightened levels of activity, Mr McEwan said he expected a plateau before another surge, with the Christmas shopping period also making a contribution.

The housing market had held up better than expected, as well.

Price growth was evident in some areas, especially further away from the central business district now that people had the option of working from home.

Mr McEwan said he still anticipated a decline in prices, but the downswing would be less than first expected and the longer-term outlook was “still pretty good”.

The NAB chief acknowledged there would be a test early next year, when government assistance packages started to wear off.

The government, however, had indicated there would be some replacement stimulus, and it was possible that the economy “might not need a lot of support after March”.

“While we are in a recession now, every day I become more confident in our ability to rebound quickly and strongly from COVID-19,” Mr McEwan said.

“I’ve never seen a Government move so swiftly and comprehensively to support the economy like we have here in Australia.

“It’s right that the outlook remains uncertain – what we’ve seen in Adelaide this week demonstrates how quickly things can change.

“But as our ability to clamp down on outbreaks improves, and the prospect of multiple vaccines becoming available becomes more certain, we can be optimistic we are on the road to recovery.”

Of the 130,000 customers NAB had assisted with $60 billion in deferred loans, Mr McEwan said more than 90 per cent were getting back on their feet, or had told the bank they would not be needing the deferral in the future.

The best thing NAB could do for customers unable to resume repayments was to “protect their equity so they can use it to rebuild”.

“In the past banks have not always done this well, focusing instead on recovering their losses without taking the time to work with customers to understand their options,” he said.

“As Australia and New Zealand’s biggest business bank we are well positioned to get right behind a business-led recovery from Covid.”