Economists believe the economy will slow sharply this year as consumers rein in spending,which is likely to drive unemployment higher,and bankers expect this will lead to more mortgage stress. Even so,King told an industry event in Sydney that the slowdown would occur gradually and be less severe than past downturns.
“This,I think,will be an event that just builds momentum;it’s not something that’s going to stop. Interest rates go up. It takes a while to feed through. It’s really a customer event,” King said at an International Institute of Finance event on Wednesday.
He said one area the bank was “doing a lot of thinking” about was which customers were likely to get into trouble,and how Westpac could help them. Despite the softening outlook,King said the economy’s fundamentals were still “pretty good”,pointing to opportunities in sectors including health,agriculture and decarbonisation.
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“Given what we’re looking at,unemployment will go up … but we don’t think it’s of the scale that we’ve seen in previous deep … recessions,so it’s very manageable. And that means that you can actually think about what are the opportunities,” he said.
King told a different event last month that the bank would use its strong balance sheet to help struggling customers through difficulties,such as by restructuring debts or putting people onto interest-only payments.
While retail banking is a relatively small part of Macquarie,its Australian mortgage portfolio has been growing rapidly and was worth $105.4 billion at the end of December.