‘Getting rocky’: Big four bank boss shares grim prediction for fate of Aussie businesses

A leading banker is calling on Australians to buckle up, with the current economic crisis only set to get worse – fast.

The boss of one of Australia’s big four banks is urging businesses to brace for impact, after delivering a grim economic outlook for the years ahead.

Despite the nation’s inflation rate dipping by 0.8 per cent from its December peak, ANZ chief executive Shayne Elliott believes financial strain on businesses will continue for some time.

Speaking at a Queensland Finance Leaders Lunch in Brisbane, Mr Elliot addressed the cause of inflation and the fallout the cost of living crisis would have on “unprepared” businesses.

Shayne Elliott has a strong message for business owners. Picture: NCA NewsWire/Simon Bullard

The banking leader explained companies born during Australia’s low interest rate period are going to be ill-equipped to deal with the events to come, heightening their risk of going under, and explained today’s high inflation came from a “crisis of excess opportunity”.

“Australia is a little unique. A lot of our businesses, our customers, have never been through something like this,” he said, according to theAustralian Business Review.

“These businesses were set up in a different environment of low interest rates so many of them don’t have any experience on how to deal through this.”

Consequently, it’s feared a number of young businesses will be forced to shut their doors while older companies thrive due to their exposure to similar economic conditions in the past.

“It’s starting to get rocky and the casualties will be those businesses with too much debt and those with no pricing power,” Mr Elliott said.

“People who have this business model, that’s not set up for this kind of environment, they’re what’s been flushed out at the moment through high interest rates.”

Australian Chamber of Industry and Commerce chief executive Andre McKellar also shared similar views to Mr Elliott, holding grave fears for small businesses.

Deloitte’s March 2023 edition of the flagship Business Outlook report revealed the financial strain on households, a decrease in dwelling construction and a “shaky” global environment had negatively impacted the nation‘s predicted economic growth.

Consequently, the advisory firm revised its expectations for the 2023 and 2024 calendar years to 1.5 per cent and 1.2 per cent respectively – the slowest outside the pandemic since the recession of the early 1990s, if reached.

Experts hold fears more companies will go bust amid rising financial pressure. Picture: NCA NewsWire/Nicki Connolly

Mr McKellar backed the report, stating it shared consistencies with evidence the chamber had on hand.

As a result, he said businesses were feeling the pinch as they contend with rising operational costs, energy prices and interest rates.

“It’s putting a real squeeze on some parts of the economy and I think that there is a concern that if interest rates were to go any higher at this point in time it could inflict some real damage,” he told Sky News.

“I do think there’s a risk that we would see more small businesses starting to struggle.

“It would impact demand, it would impact the supply side of the economy and I think there would be risks that it could impact on economic growth and ultimately we could see the labour market coming off the boil.”

Deloitte’s report comes as economists from around the globe warn a recession is on the cards, following the release of “compelling” data which highlighted some “brutally bad” economic indicators.

According to global think tank The Conference Board, the United States Leading Economic Index saw a 1.2 per cent decline in March – the lowest figure since November 2020.

The inversion of the US Treasury curve also gave Chris Watling, chief executive of financial advisory firm Longview Economics, reason to believe a recession is imminent.

“Every time you’ve had that in the US, you’ve had a recession. So I think it’s coming, it’s on its way. It’s just a timing issue,” Mr Watling told CNBC’s Squawk Box Europe.

It comes after the International Monetary Fund (IMF) released its World Economic Outlook report earlier this month which warned the world was lurching towards a nasty recession, with the risks skyrocketing for richer nations – including Australia.

Figures reveal the world is heading towards a recession. Picture: NCA NewsWire / David Crosling

So what can businesses do to prepare?

Fortunately, with some proactivity and organisation, the Commonwealth Bank of Australia believes businesses can take measures to survive inflation’s comeback.

In an article on its website, the big four bank lists five strategies business owners can implement to ensure they’re prepared for the turmoil to come.

The first strategy involves updating the company’s business plan and forecasts by conducting a formal review or audit.

Businesses are being urged to prepare as operating costs continue to rise. Picture: NCA NewsWire/Jeremy Piper

The next step is to review the company’s suppliers, namely because it’s likely they’re reviewing their own pricing and potentially passing it onto their customers.

The next piece of advice is to reflect on the brand’s core business in a bid to save money and increase business productivity.

Building a cost control culture and making the most of the business’ connection with lenders are the two final pieces of advice companies are urged to take on board to boost their financial success.

Originally published as ‘Getting rocky’: Big four bank boss shares grim prediction for fate of Aussie businesses