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NAB CEO Ross McEwan today spoke at the Trans-Tasman Business Circle in Wellington. Please find below his opening remarks.
Looking forward together
Thank you for your warm welcome High Commissioner.
It has been great to be back in New Zealand during the past week, reconnecting with colleagues and customers at BNZ and with family and friends.
Tena koutou, tena koutou, tena tātou katoa. I would also like to take this opportunity to acknowledge mana whenua here today, and the people of lands where we do business in New Zealand and the traditional owners of the land where we do business across Australia.
I am a proud Kiwi. I grew up in Hawkes Bay and maintain strong ties here. Stephanie and I call Melbourne home for now but at some point in the future we will return to paradise here in New Zealand.
It is great to be back on home soil to discuss the future. I will start today with some remarks on how Australia and New Zealand can maintain our strong economies, grow together, and look to the challenges and opportunities ahead with confidence and optimism. Then I’m happy to answer your questions as part of a Q&A which should be the most interesting part of the session
I’m looking forward to today’s conversation. This is a very interesting time for all of us – as we look beyond the pandemic to where economies are headed, global tensions, climate change and the future workforce.
It is critical our two countries maintain a stable and resilient Trans-Tasman economy where every person, every community, and every business, has an opportunity to succeed.
This requires innovation, investment, and a clear plan with strong leadership and strong businesses.
As I stand here today, together New Zealand and Australia are in a pretty good position – particularly when you compare us with other major global economies where monetary policy, war in Ukraine and the ongoing impacts of COVID are really hurting.
Consider this: Global GDP is running at 3.1% and forecast to drop to 2.3% in 2023. This is significantly below the average of 3.4% per annum since 1980.
People in the UK, and Europe are all battling very high inflation, plunging currencies and spiking interest rates.
The US doesn’t have a plunging currency, but it does have high inflation, and higher interest rates.
China is experiencing its slowest growth in decades at about 3%, due to COVID lockdowns that persist. Having had growth of 6-7% for many years, 3% must feel like a very strong recession there.
This is all having a very real impact on households. To give one example, in the UK households face annual power bills of about £3,500 per year at a time when the median household income is £30,000 before tax. The Government has stepped in and capped energy prices at £2,500 – £1,000 less – to help people.
It’s true that in New Zealand and Australia, higher interest rates, higher energy bills, and the cost of living are also having an impact.
We too are trying to solve for higher inflation.
Earlier this month, the Reserve Bank of Australia lifted the official cash rate again – this time by 25 basis points to 2.6%, its highest level since 2013. This was less than the 50 basis points the market was expecting but will nonetheless put further pressure on people. It may also be an indication that interest rates are getting closer to their peak – but time will tell.
In New Zealand, your Reserve Bank has lifted the official cash rate to a more restrictive rate of 3.5% currently – with more increases likely.
House prices are falling as a result, and we expect a peak-to-trough fall in Australia of around 20% and about 15% in New Zealand.
But – again – we’re in a good place comparatively.
I’ve said it many times in the past few years, and it remains true: Australia and New Zealand are the best two countries in the world to be in right now. We can look to the challenges and opportunities ahead with confidence and optimism.
We expect Australia to record GDP growth of 2.8% for 2022, with growth across New Zealand of 2.1%. More modest than past years but still solid growth. Even in more severe scenarios we still expect growth in both New Zealand and Australia next year.
While business and consumer confidence is down, business investment and conditions remain strong, and unemployment is at record lows. If you want a job, there are plenty out there.
Wage growth is accelerating and for the banking industry our loan book fundamentals are solid.
So, we’re still in pretty good shape.
To take advantage of the position we are in, there are three key issues that are on my mind.
- People: Growing careers and building a stronger labour force. This will unleash the productivity increases that are essential to enable pay rates to increase.
- Managing geopolitical and cyber security risks.
- Advancing our economies by capitalising on decarbonisation opportunities.
On the first point, we are nothing without our people and we owe it to them to help them be their best.
They have faced many challenges through COVID. I’m proud of how our teams at BNZ and NAB have found a way through and supported each other with great resilience and adaptability.
Now that most restrictions have ended and life is entering a new normal, businesses must create environments where our people can again be their best. Because when they’re at their best, they are at their most productive.
Key to this is getting people back into the office. I’m a big supporter of this because of the many benefits that come from being together.
Working in teams on challenges, training and learning from each other, and identifying opportunities for promotion are all benefits of being in the office together. So too are the colleagues and friends that support our mental wellbeing.
At NAB and BNZ we want our colleagues back in the office with each other more often. For NAB specifically, this means 2-3 days a week in the office. We recognise that flexibility is very important, but so too is maintaining a vibrant culture. And that can only be achieved by coming together regularly.
People also deserve great leadership. We are investing in our leaders at NAB and BNZ with a uniform leadership program that will deliver consistency of language, actions and outcomes.
We want to build careers, not just jobs. Our vision is to have a diverse and inclusive workplace that embraces a learning culture to help create richer career pathways.
That means training people in the digital and data skills needed today and in the future. We are already taking action here by training over 2700 colleagues as accredited cloud experts over the past two years.
Careers, not just jobs, also means working hard to ensure we continue to provide equal opportunities for women, for Indigenous Australians and Māori here in New Zealand.
Our workplaces must also be inclusive for ethnic minorities and for those with a disability. All areas we must do better at if we are to have colleagues reach their potential and stay with us.
Businesses can only do so much though.
That’s why we need to keep advocating for more modern education curriculums, more immigration, a faster visa process and more compelling pathways to permanent residency.
Many New Zealand and Australian businesses are struggling to find workers. This is a flow-on effect of shutting ourselves off to the world for nearly two years by closing our borders. Australia has agreed to increase the immigration cap from 160,000 to 195,000 over the next 12 months to help.
Turning to global security, the key risks are the ever-growing and ever-present threat of cyber-attacks, and the ongoing tensions between nations. These two are more often than not intertwined.
Australia’s and New Zealand’s relationships with a range of countries globally are critical to ensure our economic prosperity. We need to be alive to the risk of tensions with China and what that may mean for trade.
COVID showed us the importance and benefits of having a diverse range of trading partners to avoid or minimise disruption to critical supply chains. We need to keep working hard to maintain those partnerships and expand into new ones, so we are not trapped with the risk of just one major trading partner.
With regard to cyber-attacks, we all know these can be hugely disruptive to business, economies and communities.
I said in a statement to an Australian Parliamentary Committee two years ago that cybercrime was one of the greatest threats of our time. It remains so.
On a monthly basis, NAB has more than 50 million attacks on our digital channels. These are blocked by controls we have in place. Multiply this across the industry in Australia and New Zealand and you see size of the problem.
The recent cyberattack on Optus in Australia is the kind of incident that keeps CEOs up at night. It further illustrates the need for a comprehensive public and private sector response.
NAB and BNZ are protecting customers with new technologies such as biometrics and a team of experts that monitor customer accounts 24/7 to detect unusual account activity. Tens of millions of dollars are invested each year to protect our customers. We also partner with the government and industry on a range of key initiatives.
Unfortunately, in New Zealand last year, Netsafe reported more than $27 million lost to scams and fraud. In 2021 in Australia, the figure was $1.8 billion in reported losses. Given an estimated one third of victims do not report being scammed, the actual figure is likely much more than $2 billion and it’s growing every year.
But we can and will have to do more – together. Because for every attack or threat we stop, cyber criminals or countries behind them will launch another one using new and different methods.
At an individual level, for all of us, personal vigilance and education is vital.
The third issue I’m focused on is climate change.
The single biggest opportunity we have ahead to advance our economies is through the climate transition to net zero.
A report undertaken for the Business Council of Australia last year found that if coordinated and early action is taken, Australia’s economy stands to gain around $890 billion over next 50 years. The economic opportunity in New Zealand is also significant.
It’s important to remember that on the other side of the coin, inaction will continue to be costly. We know too well that natural disasters exacerbated by climate change not only take a human toll but a huge financial one too.
Governments will intervene and act to penalise those industries they feel are not taking emission reduction seriously. We have seen this just last week with the new farm emissions regime that is being proposed across the agriculture sector here in New Zealand.
The transition is complex and require initiatives like consistent and standardised reporting of emissions.
But the financial imperative and benefits are immense. Research NAB commissioned found the transition of our economy comes down to four key industries that must become low emissions: energy, mobility (transport), raw material manufacturing and food and land use.
They represent around 90% of today’s emissions in Australia. For New Zealand food and land use is critical to the economy, as is transportation. 43% of all New Zealand’s emissions come from animals, mainly cows.
The key role BNZ and NAB can play is to provide financial backing to support customers and communities through the transition.
The opportunities in the transition to carbon neutrality are enormous for those who focus on them.
Last week in Tasmania I met with an Australian eco-technology company that also operates here in New Zealand. They are cultivating a natural solution to climate change by growing and harvesting seaweed on a commercial scale. When transformed and added in small quantities to supplement feed, this seaweed has the ability to significantly reduce livestock methane emissions.
The opportunities in the transition to carbon neutrality are enormous for those who focus on them.
In closing, we’re in a unique position in New Zealand and Australia for what lies ahead.
But we do need to get on the front foot – together. As a strong business community, one of the key things we can do is tell the world that we are open again. And very loudly.
Our countries endured the longest lockdowns globally. I was in the UK and US a few months ago and that’s what many people there were asking me about. Is Australia open yet? What about New Zealand? They weren’t looking enough at the opportunities here as they thought we were still closed – or prone to close down again, which is even worse.
So together, let’s tell the world, tell our networks, promote that our borders are open, there are plenty of jobs and business opportunities – and that Australia and New Zealand are great places to live and work.
I repeat again: There are no two better countries to be in the world right now.
Thank you. I look forward to your questions.