Preston 9 May,2023(TIE)Westpac chief executive Peter King says businesses will bear the brunt of loan stress in a slowing domestic economy, as consumers markedly curb their spending and mortgage borrowers take some comfort from stabilising house prices.
His comments came as Westpac posted a 22 per cent rise in first-half statutory net profit to $4bn, but he cautioned of a tougher period ahead given just eight of 11 Reserve Bank rate hikes had made their way through to individual and business loan repayments.
“Business is where it ends up in terms of the stress and the reason is if you’ve got a job you prioritise the house … the roof over your head and you cut back on everything else,” Mr King told The Australian.
“The trend is clear that it’s going to get harder.”
Mr King also said tentative signs house prices were starting to rise again would complicate the Reserve Bank’s inflation fighting task as it seeks to cool demand throughout the economy.
“If consumers feel like housing prices have bottomed that normally improves sentiment and sentiment means more spending. So it’s a really tricky balance for the Reserve Bank to take demand out of the economy and not do it in a way that it’s sharp.
“I was a little bit surprised at the speed of the housing prices bottoming. But in part that’s because there’s not a lot of stock.”
Westpac is tipping house prices remain steady this calendar year, before rising 5 per cent in 2024. The bank expects the RBA will keep the official rate steady at 3.85 per cent until next year when it anticipates 1 percentage points of rate cuts.
Mr King also urged governments to reassess planning and development processes in the housing market, as supply remained a key issue.
“Release more land is the critical piece, there might also need to be when we build we’ll go higher rather than out,” he said.
“If you take Sydney we probably need to go up in the right way, and with the right quality of building … it’s actually speed of land release, speed of planning approvals and how do we build more quickly.”