AFR Banking and Wealth Summit
5 April 2017
**Check against delivery**
Good morning everyone.
And thank you to the AFR for inviting me to be here.
I’d like to acknowledge the Gadigal people of the Eora Nation and pay my respect to the elders both past and present.
I want to talk with you this morning about why I’ve got one of the best jobs in Australia, and why it’s a privilege to be leading the business division of one of the country’s strongest financial institutions.
This is a Banking and Wealth summit so I am going to start with a few stats:
- 17 million, the number of active trading businesses in Australia
- 7 million, the number of Australians employed by a small business
- 57%, the contribution small businesses make to Australia’s GDP
- $2 billion, how much NAB lends every month to Australian businesses.
That gives you a little bit of insight into me and what I do, but more importantly into the people I represent and what they need.
So today I’ll cover:
- Where I’ve been spending my time, and why
- What’s on the minds of business owners around the country
- And what we, as the bankers, regulators, policy makers and leaders need to do to support businesses to grow and prosper.
Now I am going to give you another number: three-and-a-half thousand.
That’s roughly the number of customers I have met since I took up an executive role at NAB for our Business and Private Bank.
More recently, my title has changed to Chief Customer Officer and it makes sense when you think about it. The job title isn’t Chief Steering Committee Officer, or Chief Customer of long meetings, or something else that is so vague it no longer has any meaning. It’s Chief Customer Officer for a reason.
Whether that’s a day walking the streets of Shepparton talking to small business owners, touring an air-conditioning plant in Western Sydney, or heading out on a driverless tractor on a sugar cane farm in far north Queensland, these people are the back bone of the nation and people – like you – who are dealing with all the stresses and strains of life.
Their stories are your stories. And, like you, they are working hard every … single … day to make a better life for their families, and make a difference to their community.
It’s something that resonates with me deeply.
As the daughter of first generation Greek migrants who ran cafes for four decades, I know the look of determination that comes from a small business owner with a deep desire to see his family move into a home they own, have their children in quality education, and knowing that their parents will be looked after as they move into retirement or aged care.
I also know the look of delight from a customer who has been on the receiving end of first class service.
Like the customers whose orders dad knew by heart, not because they were on the menu, but because he cared.
Or the people from the law courts next door who popped in between hearings knowing lunch would be served even if it was 10.30am or 3 o’clock in the afternoon. Again, not because lunch is served at those times, but because dad had the court timetable hanging in the kitchen and lunch was when it needed to be.
This tells me dad and many others like him, were onto this Chief Customer Officer approach way ahead of their time. And while many things have changed since those days, I can tell you relationship and making things easy is as critical to business today as it ever was.
Not just for those working in the sector, but for those supporting it. That’s all of us in the room, they are our customers and our job is to serve them.
Why do I spend time going around and talking with business owners and members of the community?
I do this because it is absolutely critical to working out how NAB can better support our customers, and make an even bigger impact on the communities where we operate.
And you can’t do that stuck in an office.
What this has done is confirm to me our customers are not sitting around thinking about banking.
They’re wondering if they have the right skills to grow their business, how to retain the staff they have and how to recruit more and different skills if they need.
They are thinking about how to grow their business and how to get ahead.
They desperately want to spend more time on the business and less time on the paperwork… while at the same time worried about how to keep up.
When it comes to banking their needs are simple; they want to know their money is safe, and hopefully growing if they’ve invested it.
That their payments are happening when they’re meant to, and if they have an idea for business growth, or a desire to create intergenerational wealth, they know they can talk to someone who understands their needs.
And other than knowing they’re dealing with good, smart people with insights specific to their industry, they really only want us to be easy and personal.
So these customer conversations have informed what we’re doing to make banking better for our customers – delivering a great customer experience, offering better digital services and investing in our people.
This simple focus has delivered strong returns for us.
We are Australia’s leading business bank and we are totally focussed on our core business in Australia and New Zealand.
We’ve continued to do more for the SME sector than any other bank in the country.
Are we as ambitious as we could be?
But the world is rapidly changing. The changes in our lives are radical but have become routine.
Who here remembers searching for a phone booth with a pocketful of 20 cent coins? Who here has children who stare at you blankly when you explain that once upon a time there was no email, no internet banking, no Netflix? And there was certainly no Snapchat.
The irony is there are probably very few in the room today, if any, who don’t know those things. So we’re probably missing an important audience in this conversation.
The young people of Australia – the millennials, who are the future of Australian business. The ones who will create, staff and run businesses in a world that is smaller, where the pace is faster and the appetite for more is voracious.
Where customers want everything 24/7 and technology will continue to create new business opportunities and allow competitors to enter traditional markets…
And of course all this is playing out in an uncertain international, political and economic environment, with intense competition, a growing impact of regulation on banks and the cost of business not getting any less.
We recently surveyed our business customers and the broader community about their attitudes to Australia, including their vision for the nation’s future.
While 82% of businesses think Australia is a great place to run a business now, only 60 per cent believe it will remain so in ten years’ time.
Again, we asked businesses what’s holding them back. There are some recurring themes:
- Lack of certainty in the domestic economy.
- Too much red tape, regulation and a complex taxation system.
- Ageing and inefficient infrastructure.
- Difficulty finding skilled domestic workers.
Now there wasn’t a box to tick around national psyche, we occasionally overlook this when we crunch the numbers, but during my road trips it has become clear to me that there is a very tangible sense of trepidation.
We know that despite optimistic conditions and record low interest rates, growth is painfully hard to come by for some industries and the need to compete is more important than ever.
It was perhaps best summarised by the Principal of a small accounting firm who said to me:
This is a country with strong economic fundamentals, business balance sheets are sound and to the north is the fastest growing region in the world – where is the energy, ambition and confidence that is so synonymous with Australian innovation and entrepreneurship of decades gone by?
Clearly these issues are complex and cannot be solved by government, or the regulators or business community working alone – and they are not going to be solved today in this room.
But what all of Australia’s business leaders, including in NAB, can do is talk more openly, with greater conviction, and more inclusively, about how we can ALL become Chief Customer Officers.
Chief Customer Officers of the economy who are responsible for lifting our game to help build a better future for all Australians.
While the word economy is usually associated with trade, federal budgets, unemployment figures, the economy is actually about people. People who are looking for a job, who want to start a business or need to provide for their families.
We need to make life easier for these people and in particular we see opportunity in the small business sector.
Small businesses make up between 95 and 97 per cent of all Australian businesses. We know there are 2 million small businesses in Australia which employ nearly half of all workers.
They are plumbers, café owners, app developers, marketers, GPs. They are Australia and they are the backbone of our economy.
So the success of Australian SMEs is an important public policy issue given its impact on the broader national economy.
The Senate’s approval of the Government’s company tax cut for over three million small and medium Australian businesses last week is a welcome boost to the sector and should be commended.
It demonstrates leadership and a clear commitment to supporting businesses to invest, to create jobs for the alarming number of underemployed or unemployed people, and a step towards establishing the right settings for growth.
But let’s not underestimate the size of the challenge. Freeing up the capacity for small businesses requires simplification at all levels.
As one small business owner said to me: “I used to think it was bad sitting up till 9.30pm every night doing the paperwork, after a day’s trade. Now that I’ve opened my second clinic in Victoria, with different pay roll thresholds and OH&S regulations, I’m up ‘til midnight most nights of the week”.
Or take the owner of an electrical business based on the Murray border, who also has contracts in Perth. Can you imagine the amount of time he spends ensuring electrical licences are up to date across three states, not to mention the countless forms he needs to fill out to comply with policies and procedures in each jurisdiction?
Cutting the red tape
Regulation plays an important role in creating an environment where people feel confident and comfortable to start a business and it encourages competition in a market-economy.
Three years ago NAB made 11 recommendations to the federal government’s deregulation initiative to reduce the volume of regulation, and improve the experience for small business while reducing the cost.
Our findings were based on feedback from NAB customers, SMEs and from our experience as Australia’s largest business bank.
We will have a lot more to say on this coming up, but what I can tell you now is that dealing with the compliance burden is still a big barrier for small business.
It’s not good enough that 69% of Australian SMEs still cite dealing with red tape as taking a lot of effort despite all the noise we’ve made about the need to remove it.
All that compliance effort comes at considerable cost to a small business owner.
Academic studies have revealed both the time spent by SMEs and the total cost of tax compliance has increased significantly in the past two decades. Based on a survey of business taxpayers, the study found SMEs spent an average of 256 hours per year on tax compliance[i].
That’s 256 hours, often late at night, just to keep up.
Hardly the environment that enables businesses space to expand, grow, employ more people and support the economy as we transition to a new wave of growth.
But there are some simple, achievable and important changes we can make to get the ball rolling.
For example if you ask the question – what actually defines a small business in Australia; there is no clear answer.
The Australian Bureau of Statistics describe a small business as fewer than 20 employees, Fair Work Australia say it is less than 15, while the ATO define it as less than $2million turnover. Depending on which bank you’re working with, there will be a range of different turn over thresholds that define whether you’re a small, medium or large business.
Essentially if you are a small business dealing with multiple layers of Government and governance and other business partners, you are different things to different people.
What this does is increase complexity and makes it more difficult to understand, simplify and support the men and women behind our small businesses. Imagine how frustrating it must be for them.
So today, to the influencers and decision makers in the room, I’m challenging us all to come together to advocate for one clear definition for small business and determine what more we can do in our own businesses to simplify things for this incredibly important sector.
For our part, this is debate we will lead. And I am asking you to join me, join NAB, let us all be Chief Customer Officers, to pursue reforms, advocate for the sector and take a whole of nation approach to solving the challenges that have been holding us back for too long.
I know as a bank we’re not perfect, we also have more work to do in this area. And we are.
We are now in the process of giving our small business contracts a complete overhaul to make them far simpler for business owners.
Standard, plain English contracts, in market by the end of the year.
Backing business in moments that matter
Economic growth is supported by good quality financial advice, trust in financial institutions and lending.
I’m stating the obvious when I say that the current public debate shows banks haven’t always got things right. Both at NAB, and as an industry, we’ve dedicated a lot of time looking at what we can do to better meet community expectations when it comes to service, integrity, trust and ethics.
I’m confident the changes we’re making in response to various industry reviews will make NAB a better bank for our customers – and that our industry can rise to the occasion.
For more than 150 years NAB has contributed to the financing of the high streets of Australia’s regional towns, and supported millions of businesses that have been making a contribution to the nation’s prosperity.
Through droughts, floods, pestilence, economic booms and busts, and what this means is we’re better placed than any other financial institution in the country to understand the economic settings that will support growth.
We know where, and when, these businesses need backing.
Our customers are telling us ‘back me in the moments that matter’ and we are responding.
Last year we launched Quick Biz, providing small businesses up to $50,000 unsecured business loan, often in a matter of minutes.
Customers are now receiving a credit decision within 60 seconds and have funds in their account within 1 business day.
And today we’ve announced we’ve introduced a new system which provides conditional credit approval to existing customers with lending needs up to $2m, without the need to go through burdensome application processes.
For the small business, this creates simplicity. Credit approvals that previously took weeks can now be done in matter of hours.
For the economy, what this means is opportunity. Potentially up to $56 billion dollars – to support 93,000 existing and future small business customers, invest and grow.
And this is good for business.
Good for the economy.
And great for Australia.
Restoring our ambition
Clearly there is an urgent leadership task and it is up to all of Australia’s leaders, including NAB, and those in the room today, to make the case for change, and to lead.
Why? Because for all those businesses buried under the weight of red tape and regulation, there is also a farmer, a GP or a University Chancellor who is telling me the big shifts in technology, and our proximity to the fastest growing region in the world, is moving them out of idleness and into growth-mode.
In fact, 85% of businesses we surveyed told us they want to expand, and 1 in 3 want to enter international markets.
Asia is top of the list for many, which is why I’m proud to be a business champion for the Federal Government’s New Colombo Plan aimed at giving young people the skills and experience needed to be successful in the Indo-Pacific region.
But there is much more we need to do as a nation, and as a finance industry, to unlock the prize.
Let me take Agriculture for example – Australia’s everlasting contributor to the Australian economy, generating $253bn of revenue in 2016 and amounting to 17% of our exports.
I’m very proud that we bank 1 in 3 farmers in Australia and contribute $26.5 billion in lending to the sector, but let’s face some facts.
Right now the industry stands at a crossroads where technology and opportunity is presenting us with serious and exciting choices for the future.
Shifting tastes in developing nations is uplifting the need for global supply, while merging technologies have the potential to dramatically boost agricultural output.
This is creating an abundance of opportunity for Australia’s agricultural sector.
But none of us should underestimate the size of the investment challenge and the challenge of evolving the structure of high potential industries if we are to achieve the economic impact for the next generation.
Volatility of financial return due to recurrent environment risk is a major barrier to investment in Australia’s Agricultural sector. But some countries are leading the pack.
I don’t think anyone will be surprised to know that the biggest agriculture exporter in the world is the US.
But what will surprise you is who is second.
The answer should be Australia, but it’s not.
It’s the Netherlands – with one of the most active Agtech venture funds in the world, world class food research institutes, developed start up community and collaboration between science, industry and government contributing to a booming sector.
As a financial industry, we should absolutely provide leadership in finding new solutions.
With greater transparency and understanding of the underlying risk and return dynamics of a farmer’s business, Financial Services could leverage this data to assess risk, return and appetite farmers have for credit.
We could create new asset classes such as soil health or pasture quality.
Blockchain or data rich payment infrastructure could create transparency.
It’s this sort of thinking that is going into some exciting partnerships NAB has embarked on, which is aimed at influencing how Australia might shape its future prosperity, wellbeing and sustainability.
There’s a similar story in every other high growth potential area of the economy – in healthcare, education, tourism, professional services.
Industries which will create exciting and rewarding jobs for a range of Australians right across the country.
It’s these strengths in Australian business that are at the heart of our NAB strategy, and at the heart of why I think I’ve got the best job in Australia.
Australia’s abundant natural assets, our regulatory frameworks and our banking sector are some of the things that have given our economy its structural advantages over the past two decades but we’re at a unique time in our history.
We have technology churning out new solutions of tomorrow while we are still grappling with problems from yesterday.
We have business owners who have every reason to be optimistic about their growth, but who are feeling despondent about the future.
Yet despite this, we have every reason to be hopeful about what lies ahead.
It’s the passion, inventiveness and determination of Australians. It’s our people who are our greatest asset.
You only have to look at our history of innovative Australians who have assisted with everyday activities such as hanging out the clothes to dry on a washing line, putting food into the fridge so it keeps fresh, taking antibiotics to help a throat infection and hearing people laugh if you were born deaf.
It’s affirmation that our greatest natural resources are human not mineral. And the challenge we’re trying to tackle is how to tap these resources and add value to the economy.
We must grab the chance right now –to work with government, regulators and industry to realise a huge range of opportunities – for everyone in this room, as well as all the many businesses out there helping drive our economy and build a more prosperous Australia.
[i] Lignier, P, Evans, C and Tran-Nam, B, 2014, ‘Tangled up in tape: The continuing tax compliance plight of the small and medium enterprise sector’, Australian Tax Forum, 1 May, p235.