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Westpac boss calls for infrastructure spending

By James Mitchell
 — 1 minute read

State and federal governments must take advantage of low interest rates to finance infrastructure projects and kick-start the economy, says Westpac's chief executive.

Speaking at the release of Westpac’s full-year results this week, the bank's chief executive Brian Hartzer described Australia’s economic outlook as a "catch-22" and said governments must fund new projects to spark consumer and business confidence.

“The outlook really depends on consumers’ confidence in their job prospects and businesses’ willingness to invest,” Mr Hartzer said.


“At the moment this is a bit of a catch-22. In simple terms, businesses have the capacity and willingness to invest but are waiting to see if consumers will spend. On the other hand, consumers are waiting to spend because they are unsure about the economy.”

One catalyst for change, Mr Hartzer said, would be for state and federal governments to further increase their investment in road and transport infrastructure.

“This is because our experience increasingly shows that when infrastructure projects are announced, business investment, and in particular small business investment follows,” he said.

Mr Hartzer said a longer-term road map of committed infrastructure investment would give businesses in those areas the confidence to invest.

“We think that with interest rates at historical lows, it makes sense for governments to borrow to fund infrastructure projects that boost the long-term productive capacity of our economy,” he said.

Westpac posted a flat profit at $7.8 billion for the year to September 30. The key takeaway from the bank’s results this week was a 185-basis point fall in ROE as the group maintained its capital ratio of 9.5 per cent.

Mr Hartzer was pleased with Westpac’s performance overall in an environment where the bank is, in his own words, under “intense scrutiny”.

“The main threat we see is from global factors, which continue to create fragility in businesses and in confidence,” he said.

“For banking this means we will probably see a slight moderation in credit and deposit growth through the year as housing activity eases and through the impact of system tightening of credit standards earlier in the year.”

Mr Hartzer expects Westpac’s asset quality will remain sound overall, although he did concede the bank will continue to see some isolated areas of stress, such as mining towns.

Westpac’s net interest income increased 12 per cent from a 6 per cent rise in average interest-earning assets and a 12-basis point improvement in net interest margin.

“The rise in margins was predominantly due to higher asset spreads from mortgage repricing including for increased regulatory capital requirements along with higher rates on investor property lending,” the bank said.

“Partly offsetting these benefits were higher wholesale funding costs and intense competition across both lending and deposits.”

Mortgages increased $23.6 billion or 8 per cent, with growth higher in the first half of the year.

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Westpac boss calls for infrastructure spending

State and federal governments must take advantage of low interest rates to finance infrastructure projects and kick-start the economy, says Westpac's chief executive.

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