Shayne Elliott, the Chief Executive Officer at the ANZ bank has said that house prices could fall by as much as 10% in the midst of the coronavirus pandemic.
It’s expected that Australia’s pandemic recovery will be “a lot more gradual, a grind out of the recession,” according to the head of one of Australia’s largest financial institutions.
Earlier today, Mr Elliott told a Parliamentary inquiry that Australia, like the rest of the world, is not expected to make a V-shaped – or speedy – economic recovery, detailing that more than 15,000 mortgage holders with ANZ are unable to pay their mortgage.
ANZ is the fourth-largest bank in Australia, with Mr Elliott detailing that of ANZ’s 84,000 mortgage holders that have deferred their repayments, “about 15,000 of those people have said, ‘right now, I’m really uncertain, I’ve lost my job… and I probably am going to need more help’ and they’re the people we’re talking to,” he said.
Mr Elliott told the committee that “many of these people were running businesses that were perfectly well and they have been shut down by government policy – which we all understand – but they’ve done nothing wrong. It boils down to ‘when are they allowed to operate again.”
“It’s going to be devastating for anybody. Thousands of people are going to be in a struggling position,” Elliott added.
ANZ, along with major Australian banks have allowed customers to defer repayments on loans issued until March, 2021.
Mr Elliott said he forecasts that the Australian housing market will drop by around 10%, and any signs of a recovery will be hindered by Australia’s reliance on both immigration, as well as the free movement of people and goods; both of which have been dramatically affected by the pandemic.
“I have worked in different markets around the world and I have seen that movie many times… it’s a concern,” he said while adding that ANZ has one of the lowest exposures to the property market of all major Australian banks.
“I don’t want to sound alarmist but we are more concerned on the investor property market, given the ability of people to pay rent, than owner-occupiers,” he added.
In terms of business insolvencies, Elliott stated that “we do believe there will be, sadly, a pick up in insolvencies probably at some point in the middle of next year as some of these packages start to be removed,” in reference to the JobKeeper stimulus payments to employers.
“We think the peak of insolvencies is probably more like the middle of next year, that’s when the crisis will start to hit the banks,” Mr Elliott said, adding that “we think GDP recovers in an absolute sense sometime in 2022.”
In response, ANZ has been relocating resources within its team to forecast and remediate the impact of a significant amount of business insolvencies in 2021.
ANZ’s chief also rejected claims that the major banks were failing to provide businesses with loans during the crisis, stating that “we have been able to very quickly provide them with new funding.”
“But for somebody we don’t know, who turns up to ANZ for the first time, then we have to be prudent and we will take more time to assess a company, their business model, their character, the risk profile of that business.”
ANZ’s head of retail and commercial banking, Mark Hand told the parliamentary inquiry that in the early phase of the pandemic, the bank – like its competitors – were unprepared for mass inquiries about refinancing their mortgages.
This resulted in delays of weeks for applicants, which ANZ has said it has now shorted to just 10-days, aiming for a 3-day turnaround by the end of September.