2019 CEO Survey: Hamish Douglass, Magellan Financial Group

Magellan has benefited from global low-interest rates as they have inflated asset values, says Hamish Douglass.

Magellan chairman and co-founder Hamish Douglass. Picture: Britta Campion

Every year The Australian’s John Durie asks some of the biggest names in Australian business five key questions about what’s coming in the year ahead.

Here is what Magellan’s Hamish Douglass sees ahead in 2020.

Read more from the CEO Survey.

How is your company affected by low-interest rates and what is needed to boost the economy?

Perversely, Magellan has benefited from global low-interest rates as they have inflated asset values. As a fund manager, we and our clients have benefited from higher asset values. We have seen an impact on retirees who have been hit from the effect of lower interest rates on income they can earn on term deposits and investments such as hybrids. The lower-for-longer outlook for interest rates will put increasing pressure on retirees and often forcing them to take on riskier investments.

The biggest issue for the economy is the uncertainty that companies are facing in committing to major capital investment decisions. Much of this is related to uncertainties created on a global stage and particularly the uncertainties created by the US-China trade situation and potential for the world’s two largest economies to decouple. Two things the government could do to boost confidence and the economy would be to improve our bilateral relationship with China, our most important economic and trading partner, and to develop a comprehensive infrastructure investment program and finance it with long-term borrowings in this low-interest-rate environment. Major infrastructure improvements are a key to long-term productivity improvements.

What is the impact of government regulations on your company, including those applying to the financial sector?

Government regulation has had very little direct impact on Magellan. The Hayne royal commission has had a material impact on the adviser community and is triggering a major shake-up of the advice market.

What percentage of company revenues are spent on research and development, and how is your company using technology to improve performance?

We spend a modest amount on direct research and development. We do spend considerable time in product innovation such as the development of active exchange trades funds in Australia, which has led to major consumer benefits, and on a new retirement product for the Australian market. Magellan uses data science and machine learning to improve many processes in our business.

What are the three major policy issues facing the country and what should be done about them?

•The major issue facing the country is the demographic timebomb that is ticking. We need a comprehensive, forward-looking policy to address this. We need a forward-looking immigration policy that keeps our population growing at a decent clip and our workforce growing. The political debate from both sides of politics is short-sighted and damaging to the long-term economic interests of the country.

•To support a Big Australia vision with strong economic growth, we need to invest in enabling infrastructure within our existing cities and also to develop some major other major metropolitan areas on the east coast of Australia. With the right vision and infrastructure Australia can support a much larger population. This could be our major advantage over most other developed world countries.

•We must also invest in our educational institutions to ensure we are the clever country.

What are the major impediments to long-term growth facing your company and what can or is being done about them?

Our impediments are internal rather than external. We have to take control of our own destiny and deal with the external environment at exists at any point in time. There are always external impediments, and that will never change. Nothing is unusual at the moment.