Trade, population key to recovery says Macquarie CEO Shemara Wikramanayake

The long term drivers of Australia’s prosperity will remain the key to kick-starting the post-COVID economy, says Macquarie CEO.

Macquarie Group CEO Shemara Wikramanayake addressing the comapny's investor conference from home. Picture: Supplied.

Macquarie Group chief executive Shemara Wikramanayake believes Australia is well placed to weather COVID-19 economic shocks and an ensuing global recession, given long-term activity drivers such as trade and demand for infrastructure remain in place.

Ms Wikramanayake was speaking at the Macquarie Australia Conference 2020, which will see 60 Australian and New Zealand companies present online this week to more than 500 investors around the world.

“In recent days the curve of new infections is flattening in many countries, and commentary from some governments has turned to strategies that will allow the gradual easing of COVID-19 measures, reintroduce freedom of movement among communities and provide economic activity,” she said as she opened the conference on Tuesday.

“What we can expect in the short-term is a global economy in recession as governments begin to walk back from the sudden economic stops implemented in an effort to contain the virus. However, quantifying the magnitude of the near-term hit with any certainty is very challenging … there are strong long-term fundamentals which will re emerge as we move beyond this environment.”

Ms Wikramanayake cited Australia’s stable political system, “decisive stimulus support”, the federal government’s relative balance sheet position and the economy’s links to Asia as buoying prospects for an eventual recovery.

“Connectivity to long-term growth in the Asian region” was key, she said. “We are already seeing signs of economies reopening in some parts of Asia and Australia is well placed to resume its economic opportunities within the broader region.”

Macquarie is an asset management giant and investment bank and Ms Wikramanayake is due to hand down the company’s annual profits on Friday.

That comes after Treasurer Josh Frydenberg and the government laid down the platform for unlocking COVID-19 social restrictions, revealing a $4bn hit to economic activity for every extra week they remain in place.

Ms Wikramanayake highlighted long-term themes that would help reignite economic activity including urbanisation and population growth driving demand for infrastructure around the world, and climate change leading a transition in the energy market.

She also said data and technology would play a bigger role in economies as they recovered from the pandemic.

“Innovation and digitisation will see technology continue to disrupt many sectors. Indeed, leanings from the current crisis will see technology further enhance areas such as healthcare, education and the workplace in general,” Ms Wikramanayake added.

“In times of economic uncertainty, we need to keep a long-term approach, focusing on the areas that continue to drive global demand and ongoing investment.”

Ms Wikramanayake said Australia had also “moved quickly” to facilitate the recapitalisation of companies suffering COVID-19 revenue shock, as the ASX and corporate regulator relaxed shareholder approval thresholds.

“The ASX has been the most active equity raising market in recent weeks,” she added. “Demand for those raisings is also a statement of confidence in the Australian market and in our companies generally.”

With a spate of companies including National Australia Bank, Webjet, and QBE Insurance raising capital from investors in recent weeks, some fund managers expect this recapitalisation round may come close to or eclipse the $100bn seen during the global financial crisis.

Macquarie’s investment banking arm advises on capital raisings and mergers and acquisitions.

The group is reporting full-year earnings on Friday, with analysts expecting it to deliver a profit of $2.87bn, down from 2019’s record of $2.98bn.

Ms Wikramanayake has stuck to guidance for profit in the 12 months ended March 31 to be “slightly down” on the same period in 2019. Investors will, though, also be keenly watching Macquarie’s decision on dividends, after Westpac, ANZ and Bank of Queensland announced deferrals on potential payments during the COVID-19 crisis.

That aligns with guidance from the banking regulator last month which asked financial companies to seriously consider whether they should be paying dividends in the current climate.

In April, Macquarie provided an update acknowledging capital guidance from the Australian Prudential Regulation Authority, saying it would “work through” the detail, including those on potential reductions in executive bonuses.

Macquarie had proforma surplus capital of $5.3bn as at December 31. The stock rallied 3.1 per cent on Tuesday to close at $100.24, surpassing gains in the S&P/ASX200.