Households in decent shape to weather challenges
ANZ chief Shayne Elliott addresses the impending economic stresses on Australians and how his big-four bank will respond to ease the burden on customers in 2024.
The number of customers with home loans experiencing financial stress is relatively modest by historic standards, because many came into 2023 with strong household savings and our lending buffer was relatively high. We are seeing now that much of that has been absorbed but many households now have higher incomes or may be benefiting from rising house prices.
So on average, their balance sheets remain in decent shape, and the same can be said for most of our small business customers.
However, we can see that some customers are starting to cut back on spending and changing what’s in their shopping basket, to save money. And for each customer who is struggling, these times will be tough.
That’s why we regularly contact customers to check in and make sure their loan arrangements remain suitable for their circumstances. We’ve also improved our data capabilities to proactively identify customers whose transaction patterns indicate potential future stress.
How is inflation and the prospect of higher-for-longer interest rates affecting your business? Importantly, is the behaviour of your customers changing?
The Australian economy has been remarkably robust through 2023 but we do see the environment becoming more challenging as we head into 2024. Our economists expect economic growth to slow next year before the beginnings of a rebound in 2025, however they expect we will avoid a recession.
What do you think is the big area of reform needed to happen so the Australian economy (and your business) can sustainably reach full potential?
We know many people are concerned about the ability of hardworking people to buy a home. We all agree we want to be lending responsibly, but the unintended consequence is that it is harder to get a home loan in Australia today than it has been in 30 years. Other factors include the high cost of construction and a lack of affordable housing. We want to help people to be able to get on to the property ladder and not feel like that is a dream beyond their reach.
While many in the community are aware and concerned, no one group can solve this alone. The issue requires a co-ordinated strategy built for the long term across government, banks, builders, developers, state governments, councils and others. The market won’t be able to solve this easily as distortions, including from taxes and local development laws, can exacerbate the issue.
Australia has six years to meet its 2030 targets for a 43 per cent reduction in baseline emissions. What needs to happen here?
This is a significant challenge for governments, businesses and communities alike. We have an important role to play as the largest institutional bank in Australia, supporting our large business customers in the transition to net zero. The key is going to be collaboration and we know the most important role we can play is working with our customers to reduce their emissions and enhance their resilience to a changing climate.
It’s relatively easy to run away from a problem and say “these are all the things we’re not going to do”. We prefer to focus on the things we are going to do and how we’re going to help emitters reduce their emissions. We’ve got to work together. We’ve got to make sure the companies we work with have a credible plan to transition to net zero. Also, let’s not forget that this energy transition represents an incredible opportunity if we get things right.
What level of adoption is your business currently at with the use of AI technology?
I’d say we’re somewhere between the experimentation and early adoption phase at this stage, but things are moving quickly. We recently launched an ANZ-built tool called Z-GPT which allows staff to type in a simple question, and an answer generated from internal data is suitable for exploration using AI. We think of it as our in-house version of ChatGPT and it will be rolled out to many of our staff in 2024.
We are also testing solutions that will make all our people more productive in how they collaborate. We’re running multiple experiments in our so-called AI Centre of Experimentation, so you can expect to see more initiatives in coming months. We expect the turnaround time from experiment to pilot will be shorter than we have previously experienced, given the rate of change with this new technology.
What external issues do you expect to impact or disrupt your business within the next 12 months – the so-called 3am thought?
I often think about potential disruptions from our fintech competitors, given the industry is evolving at a rapid pace. We need to be constantly investing and learning in order to stay relevant to our customers. We’re lucky as we’ve become pretty accustomed to dealing with disruption in our industry, and in simplifying our business we are well set up to respond.
My other 3am thought is around the current cost-of-living pressures. We need to be careful because we often look at the numbers, but numbers are not people. We need to make sure we think about the people who are doing it tough as inflation and interest rates remain high. And there’s an increasing number of those people – the renters, the young, the people without secure employment – who are actually in a pretty dire position. We need to support them.
Is business getting the balance right between investor, customer and other stakeholder demands when it comes to ESG issues?
At ANZ we consider the ethical, social, economic and environmental impacts of decisions we make. These are underpinned by the G in ESG – governance. We take this extremely seriously and work hard to get the balance right between the needs of all stakeholders. Our ESG governance framework considers how relevant risks and opportunities are effectively managed, how decisions are made, how we engage with our stakeholders and how we set targets. Ensuring our governance and risk management processes are embedded in our day-to-day work helps us better identify and manage emerging risks while achieving fair, ethical and balanced outcomes.
How has your organisation’s approach to staff working from home evolved since the pandemic?
At ANZ, we’ve had flexibility arrangements in place for a long time and well before the current focus on working from home. Today our people have the flexibility to work up to half the time remotely, whether that’s from home or another location. That means we expect on average that our people spend a minimum of 50 per cent of their scheduled work time in the workplace.
It’s worth noting, we have a diverse workforce spanning 29 countries doing very different jobs – and one size doesn’t necessarily fit all. Productivity for a contact centre is very different to productivity for a foreign exchange trader, or a banker in commercial, or a software engineer. That’s why we are principals based; we do what works and that will continue to evolve just has it has over the past decades.
We do believe there are many benefits to working in person alongside others, including opportunities for informal learning and development, building networks and sustaining a sense of belonging and a strong culture.
I’m not suggesting everybody has to be in the office every day, I don’t think we’ll be going back to those days. But we do see significant benefits for our staff from being in the office and that’s what we’re working towards.
Shayne Elliott is chief executive of ANZ.