Lockdowns May Delay Australia Growth by 6 Months, CBA Chief Says

(Bloomberg) -- Rolling lockdowns across Australia’s heavily-populated east coast could push back economic growth by about half a year, before it accelerates again through 2022, according to the head of the nation’s biggest lender.

“We’ve seen a number of factors supporting growth,” Commonwealth Bank of Australia Chief Executive Officer Matt Comyn said during an investor call Wednesday. These include “the significant accumulated household savings, a swift employment recovery due to low supply of labor, expansionary fiscal and monetary support and the strong housing market.”

Comyn’s comments come after CBA reported a 20% rise in cash profit for the year to June 30, reflecting a rapid economic recovery before the outbreak of the delta variant of coronavirus forced lockdowns in major cities. Australia’s economy is now expected to contract this quarter, with Sydney in its seventh week of stay-at-home orders.

His optimism chimes with the stance of Reserve Bank of Australia Governor Philip Lowe, who said last week he expects a rapid bounce back from the outbreak and is pushing ahead with a plan to taper bond purchases.

“While Australia faces near-term challenges due to the lockdowns, we expect growth will simply be pushed back by six months, with the economy rebounding in late 2021 and growing strongly in 2022,” Comyn said.

Households also appear to have a degree of confidence in the underlying resilience of the economy. Consumer sentiment dropped 4.4% in the early part of this month, a decline that could have been much larger given two-thirds of the population have been under lockdown at various points in recent weeks.

Loan Deferrals

CBA said home-loan deferral numbers at the end of July were much smaller than at the same time last year. Business lending is still strong and the bank is seeing very low numbers of business loan deferrals so far. If lockdowns become much more protracted then deferrals are likely to rise, it said.

Australian homeowners, like their counterparts in much of the developed world, have experienced a wealth effect from surging property prices fueled by record-low borrowing costs.

Comyn, in a separate call with reporters, said there had been a slight easing in the market in the past couple of weeks, with fewer listings and properties for sale. But, he added, that’s in some ways a good thing given house prices recorded a 14% increase in the first seven months of the year.

Among potential risks ahead, he cited the “critical” vaccine rollout and ongoing global trade and geopolitical tensions.

Australia has seen a rapid deterioration in ties with its key trading partner China, while relations between the U.S. and China are also increasingly frosty.

©2021 Bloomberg L.P.