High interest rates needed to fight inflation but economy in good shape, says NAB chief Ross McEwan

Australia will avoid a recession but the boss of National Australia Bank has warned the economy faces a rocky nine months before a recovery appears on the horizon.

Australia will avoid a recession but the boss of National Australia Bank has warned the economy faces a rocky nine months before a recovery appears on the horizon.

Speaking last week at a banking industry event, NAB chief executive Ross McEwan said the economy and banking sector were both still in good shape even as higher interest rates pinched consumers.

Mr McEwan warned things were getting “tighter” as interest rates squeezed lending and consumer spending while home loan costs soared, but the higher rates were necessary to control inflation.

He said Australia was well positioned to weather tougher economic times.

“There’s a resilience in this economy that you’re not seeing in other economies around the world. This is the luckiest country in the world,” he said.

“We’ve got great businesses and we’ve just got to get in there and support (them).”

Mr McEwan said the economy was in “pretty good shape, but it has to slow down” to combat inflation.

“People are struggling with interest rates up, cost of living’s up. Everything’s up,” he said. “We’ve just got to get them through because in another nine months I think this economy will kick again.”

Mr McEwan, who is preparing to deliver NAB’s third-quarter earnings update on August 15, said the banking sector was “well capitalised” with the benefits of “good liquidity, and good regulators”.

“As long as we all stay focused on customers and their needs and making the tough decisions when there’s a problem, this industry will go from strength to strength,” he said.

Mr McEwan said banks should focus on their “own strategy” in the months ahead.

“We looked at all the strategies of banks (globally) and we said relationships are what we need to drive this bank forward,” he said. “It’s the heart of our leading business bank and it’s stood us in really good stead and will going forward.”

It comes as uncertainty lingers in the banking sector after the competition regulator rejected ANZ’s attempt to take over Suncorp Bank in a move that would have seen the fourth-placed lender leapfrog NAB in retail market size.

NAB, Australia’s largest business lender, has faced growing competition from pure play business financiers like Judo Bank. But Mr McEwan said there were big opportunities for NAB in lending on clean energy projects.

“There’s trillions of trillions of funding that are going to be done between now and the end of 2050,” he said.

“We are in for an enormous time for the industry if we get in and support the transition.”

Mr McEwan said the agriculture, housing, commercial real estate, trucking and rail sectors were all areas of opportunity.

“It’s not all going to be linear, it’s going to be a bit crunchy at times. But I’m confident we’ll get through it,” he said. “We need support from the government to lay out the path that we are all heading on – we can’t do it on our own.”

Originally published as High interest rates needed to fight inflation but economy in good shape, says NAB chief Ross McEwan