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Category: Housing Industry / Banking / Business, Economics and Finance / Company News / Economic Trends

ANZ boss says economy showing emerging signs of stress

Wednesday, 30 Nov 2016 14:03:52 | Elysse Morgan

ANZ says property prices in pockets of Sydney and Melbourne are a worry. (ABC RN: Fiona Pepper)

ANZ chief executive Shayne Elliott has warned there are areas of concern across the economy and when it comes to property bubbles, "smallish" city apartments are a particular worry.

"On a relative basis it is certainly tougher than what we've seen in the past," Mr Elliot told a Thomson Reuters business event.

"Whether it is in the mortgage belt, whether it is in small business or big business, there are emerging signs of stress and they are nothing to be alarmed about but we're not used to them either, so it means we have to think differently."

The potential of higher interest rates for home-owners and funding costs for businesses presents challenges they may not be prepared for.

"[Borrowers] have essentially been lulled into a sense that not a lot is going to change and there is some predictability about rates and currencies and the world was pretty stable and suddenly that's all changed," he said.

He said the environment was changing rapidly and customers now need a lot of help thinking through and planning for the risks that are now on the horizon as a result of Brexit, the Trump presidency, and interest rates and funding rates rising.

Property prices in the pockets of Sydney and Melbourne are a worry for the bank executive.

"There are clearly parts of the market namely smallish apartments in Melbourne, but also in Brisbane, and starting to be here in Sydney because there's over-building and you can look to say there's going to be an excess of supply," he told the business gathering.

"It doesn't mean it's a calamity or a disaster but it does mean we should be cautious."

Mr Elliot said the bank would consider raising interest rates out of step with the Reserve Bank if its funding costs rise, despite the bad press such a move has earned banks in the past.

While raising funds offshore is not getting more difficult yet because of the strength of Australian banks and deposits, ANZ does expect cost of funding to rise.

When questioned about whether profitability can be maintained in line with previous years Mr Elliot was cautiously upbeat.

"Because of our very large exposure to the institutional sector in Australia, more things can potentially go wrong in our business so we are probably more cautious as a result of that, but having said that, the first couple of months have ticked along pretty well."

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