(Bloomberg) -- The chief executive of National Australia Bank Ltd. said there are increasing divisions within the country’s economy, making the task for appropriate monetary policy settings even more tricky.
“There are two Australias,” Andrew Irvine, the CEO of Australia’s biggest business bank, told the House of Representatives Economics Committee’s annual review into lenders Friday. He noted that profit is booming for resources firms and related areas, even as shortfalls in housing has created the country’s “single biggest social issue.”
His comments underscore the challenges facing policymakers as the central bank attempts to balance high asset prices with restrictive interest rates at the same time as Australia’s government tries to alleviate the impact on consumers from price increases for energy and food.
“The averages tell a story of a country growing at 1.5%, which is the lowest Australia has grown in 30 years. The problem is the averages don’t tell the full story and we live in a very diverse country,” said Irvine, who replaced Ross McEwan as CEO of the nation’s second-largest bank in April.
“In southeast Australia, Victoria in particular, people are doing it tougher,” Irvine said. “These economies are more correlated to domestic demand, more correlated to interest rate settings than the resource correlated economies. That’s where we’re seeing the hardship emerging,” Irvine said.
Irvine’s comments have echoes of Australia’s experience at the height of the mining investment boom 15 years ago when the economy was split between booming resources and moribund industries in areas like western Sydney. The Reserve Bank frequently highlights that interest rates are a blunt instrument that has to be set based on aggregate demand, meaning its impact will fall disproportionately on some parts of the economy.
Many of the bank’s customers are having to make tough decisions about where to spend their money, Irvine said. NAB is the third of Australia’s largest four banks to front the parliamentary review.
ANZ Group Holdings Ltd. Chief Executive Officer Shayne Elliott is later expected to face extensive questioning from Australian lawmakers for the first time since a series of scandals over the bank’s bond trading business and wider culture.
On Thursday, Commonwealth Bank of Australia CEO Matt Comyn said regulators have an “undue level of concern” about the big banks scrapping bonus caps, while Westpac Banking Corp.’s Peter King criticized social media tech giants for being “missing in action” in closing the loop on scams.