When it comes to a front row seat to Australia’s economy, no one is closer than Matt Comyn who heads the country’s biggest lender, the Commonwealth Bank. And the good news is that he doesn’t think the sky is falling or that the Australian property market is ready for a hard landing.
Comyn, who is so close to the action he can smell the spray of the nation’s economic sweat, is rather optimistic. The ABC is our largest mortgage lender, largest bank deposit holder, essential small business lender and (most importantly) major provider of credit and debit cards – giving the bank granular information in real time on our expenses and late payment of interest.
Armed with this intelligence, it should be noted that the ABC broke away from the group of economists to predict that inflation is about to peak or may have already peaked in Australia and that the inflation rate Reserve Bank interest will reach 1.35% this year and 1.6% next year.
In other words, Comyn thinks the RBA’s May rate hike of 0.1% to 0.35% is already starting to show results.
“We expect that, having seen in previous cycles, the Australian economy and consumers will be quite sensitive and responsive to changes in the exchange rate. Therefore, we expect the rate of inflation to be slowed by increases in cash rates that will reduce demand and the national economy,” he said at the masthead on Thursday.
That said, Comyn readily admits its bank’s crystal ball was clouded in the same way as the rest of the market, which hasn’t seen the speed at which inflation has hit the economy this year.
The difference between the position taken by the ABC and other economic forecasters is that the bank believes monetary policy will bring inflation down faster, in part because we have high levels of personal debt and are therefore particularly sensitive to rate hikes.
And because of that, Comyn thinks the RBA won’t need to push the cash rate up to 3% – a level that is predicted by many others.
This view is supported by new surveys of consumer sentiment which show that it has indeed fallen into negative territory as people are more intensely concerned about their future financial situation.