Westpac’s Chief Executive, Anthony Miller, has indicated that recent declines in inflation strengthen the case for potential interest rate cuts. Following the announcement that underlying inflation fell to a three-and-a-half-year low of 2.7 percent on July 26, 2023, Miller suggested this trend could influence the Reserve Bank of Australia’s decision-making in the coming months.
Speaking at a Trans-Tasman Business Circle event in Sydney, Miller noted the encouraging signs in the economy, including a reduced number of borrowers falling behind on repayments. He stated that markets have priced in approximately a 90 percent likelihood of a rate cut in August, reflecting a broader consensus among economists.
Inflation Trends and Economic Optimism
Miller emphasized the importance of the “trimmed mean” inflation rate, which excludes volatile price changes, as a key indicator for the Reserve Bank. “The trimmed mean is the one that I think we should all fixate on. The fact that it wasn’t up is another data point that reinforces it is open to the Reserve Bank to cut rates,” he explained.
While Miller acknowledged that a rate cut is not guaranteed following the Reserve Bank’s surprising decision to hold rates steady earlier this month, he remains optimistic. “It feels like there’s even more evidence now that they should [cut rates],” he said. However, he cautioned against assuming that a cut is imminent, recalling that markets were confident of a rate decrease last month, only to be surprised when rates remained unchanged.
Miller expressed confidence in the Reserve Bank’s ability to manage monetary policy effectively, stating, “I think we’re lucky to have a Reserve Bank and a governor with that independence and that confidence to look after the country’s long-term interests.”
Westpac’s Growth Strategy and Economic Proposals
During his address, Miller provided insights into Westpac’s performance and growth strategies. He noted a decline in stress levels among business banking customers and reported “very encouraging” demand for credit. As the head of Australia’s oldest bank, Miller is navigating challenges posed by heightened competition from entities like Macquarie Group in the mortgage market.
Part of Westpac’s strategy involves enhancing services for its existing customer base of 10 million, of whom only a third consider Westpac their primary bank. To achieve this, Miller plans to recruit more customer-facing bankers and improve the bank’s digital services.
Looking ahead, Miller outlined several proposals for the federal government’s upcoming economic roundtable, including encouraging one million people to relocate to regional centres, adjusting income tax thresholds in line with inflation, and implementing regulatory changes to facilitate the construction of more affordable housing.
In a discussion with Sean Aylmer, co-host of the Fear & Greed podcast, Miller also addressed media scrutiny surrounding National Australia Bank CEO Andrew Irvine. Recent reports suggested that major investors had concerns about Irvine’s management style and conduct at events. Miller described the scrutiny as “very unfair” and acknowledged the challenges of leading a major financial institution. “You are representing this company, and there is a responsibility in how you conduct yourself,” he stated.
As Westpac navigates the complexities of the current economic landscape, it remains poised to adapt its strategies in response to evolving market conditions and consumer needs.
