Fresh from visiting the opening of Westpac’s new Newcastle business banking centre, Chris de Bruin is feeling upbeat.
The economy continues to surprise to the upside, businesses are mostly travelling along nicely and the vaccination rollout is starting to speed up. Sure, the threat of ongoing lockdowns is creating uncertainty and the international border closure is causing labour and skills shortages in certain sectors.
But overall, the economy is “ready to surge into very strong growth” and demand for business loans was picking up.
“Not all industries have done well, there are small pockets of challenges, particularly where we have rolling lockdowns (such as) in the hospitality industry,” the chief executive of Westpac’s Consumer & Business Banking division, its largest by earnings, said after visiting customers and colleagues in NSW’s Hunter region last week.
“But broadly, I think we're in really good shape.”
After the latest national accounts data revealed a pickup in business investment, Mr de Bruin said while some businesses were cashed up and did not require debt, improved business confidence was translating into stronger borrowing demand for the likes of new equipment, real estate and factories. He said after taking a conservative approach heading into COVID, the bank had revisited business lending processes “to make it as easy as possible for people to borrow from us”.
“We are really starting to see that surge come through,” he said.
"The confidence that they can invest for future growth is now really high and we’ve started to see that translate into demand.
“We continue to see very strong demand for real estate projects, and what we're now seeing is a much stronger push on equipment financing…around machinery and equipment that is allowing (businesses) to prepare for the demand that they see coming.”
In the March quarter, the ABS this month revealed that private business investment jumped 5.3 per cent on the back of a 10.3 per cent rise in machinery and equipment investment – the strongest quarterly rise since December 2009. GDP rose a stronger than expected 1.8 per cent, with economic activity now 3.8 per cent above pre-COVID levels.
“The stand-out story is the pivoting from consumption to investment as the dominant driver of the recovery,” Westpac chief economist Bill Evans said this week, as he upgraded his 2021 and 2022 GDP forecasts to 4.8 per cent and 3.2 per cent, respectively.
Mr de Bruin, who joined Westpac this year from Middle East non-bank Deem Finance, said Australia had come through COVID stresses “extremely well” and was well placed to continue its run, which would be given a further boost once it was safe to open up to the world.
“If we dialled back a year ago and looked at the economy and hoped for the economic data, this would be at the very top end of our expectations – incredible forward-looking forecasts on GDP growth, but importantly very low levels of unemployment,” he said.
“The Australian balance sheet on aggregate for both businesses and consumers are in really good shape, the system's primed with a lot of cash, so it feels that we're ready to surge into very strong growth.
“The sooner we get through vaccinations – it's really important that everybody gets vaccinated – that is the route to getting the borders open again.”