Finance Leaders On The Corona Crisis

Earlier this week Australia's banking and wealth leaders convened as part of one-day industry event to look at the industry's response to the coronavirus pandemic. The big bank CEO's and others offered their thoughts on how long the crisis would last and the role their institutions could play. A focus was on superannuation and also the overwhelming need for personal advice to help guide Australians through what is being called a "once in a hundred-year crisis"

Much has been made of the idea to “hibernate” the Australian economy. Indeed, Treasurer Josh Frydenberg told reporters ahead of the meeting of G20 Finance Ministers overnight that the world’s largest economies should signal to their citizens that they are doing whatever it takes and that “First, our priority should be putting the global economy into controlled hibernation while quarantine measures are in place…”

While the immediate health priorities will take precedence, “hibernation of the economy” may sound reasonable, but there would be a myriad of different circumstances to work through and these would be changing as the crisis unfolds. Speaking at the AFR’s Banking and Wealth Summit, CBA chief Matt Comyn alluded to this, saying "I don't necessarily subscribe to the view that businesses will be hibernated for six months…I think we look at isolation and ...containment. If there are further measures, presumably they'll be in place for weeks, but we all need to be dynamic and flexible."

National Australia Bank CEO Ross McEwan, speaking about the potential for businesses to hibernate said “I am not sure they can, it would be a very big strain. But we will need to wait and see how long the health crisis goes for.” In making assessments of businesses, McEwan said you need to look at the health of the business before the crisis and that the bank would have to be "very open an honest with the customer sooner, rather than later.”

ANZ CEO Shayne Elliott said that a proposed shutdown could be for "between 3 and six months". He said banks are the "ICUs" [intensive care units] of the economy, and, like emergency medical practitioners, they will ultimately have the unenviable task of deciding which businesses to save or not.

For those in the wealth sector, AustralianSuper chairman Don Russell warned against investors trying to stock pick or trade the crisis."Timing the market will lose you money," he said. In difficult times, we need portfolio managers and pools of capital that can "look through" the "short-term shock”.

AMP CEO Francesco De Ferrari also spoke at the summit, perhaps not surprisingly re-iterating the importance of financial advice. "We have a big advice gap in Australia, and it is getting worse," he said. The importance of advice was also re-enforced by Deanne Stewart, CEO of First State Super, who said financial advice requests from their members had been increasing up to 70% above their normal levels.

There is a general feeling that the different sectors of the business community have been working well together in the face of the crisis, with ACCC boss Rod Sims saying the kind of coming together that would otherwise be considered cartel behaviour is an appropriate method for quickly getting relief to those who need it.

Not all were in agreement however, with the government’s proposal of early access to Super still generating a somewhat fragmented response. Although broadly supportive, Don Russell cautioned "You don’t want to higher withdrawals to make it difficult for funds to ride the rebound that will inevitably come…problems will come if the early withdrawal is significantly higher than people have been expecting." He also said "The general observation is the more the super funds have to manage the liquidity around this ... the less able the super funds are to be in a position to fund the long-term needs of Australian business". But Assistant Minister for Superannuation Senator Jane Hume – who was previously a senior policy adviser at AustralianSuper, put super funds who might be dragging their feet on the changes on notice, saying “no part of society or the economy is a sacred cow”. Ms Hume accused some super funds of “self-interest dressed in sanctimony” and said that some were claiming immunity from the changes on the basis of “a higher calling”. “Often those who seek to thwart collective efforts are doing so to hide individual failings,” Ms Hume said. 

Despite concerns, it is unlikely any industry fund will elevate direct opposition to the government’s proposals, though the details will still have to be worked through. As an example, founder and chair of superannuation research and ratings house SuperRatings, Jeff Bresnahan claimed the current potential for rorting the system is significant and there needs to be a winding back of the eligibility criteria. His company was urging the Government to rethink its approach so that money could be delivered to those in need while protecting their retirement nest eggs. He has proposed changes including allowing funds to take a loan out from the Reserve Bank of Australia to meet all claims, and ensuring that payments are only made to those in genuine hardship, rather than the “self-assessment” that is currently in place.

With the crisis not even past its mid-point it is understandably difficult for governments and businesses to formulate policy responses. There are massive amounts of money being bandied about already and it remains to be seen how “hard” or “deep” the economic flow on effects from the Corona crisis will be. But in thinking about the consequences for the economy, business and the Australian people, prhap the last word at this point should go to another speaker at the summit - Deloitte Access Economics Partner Dr Pradeep Philip, who said the biggest economic impact of the virus is closing businesses and rising unemployment. While there will be economic implications of the COVID-19 response, these measures are in the long-term economic interests of the world.

Refocussing those present to the escalating health crisis still rapidly unfolding, he said "Economies can recover, the dead can't."

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