A new phase of growth for all: Whelan

The global economy is entering a new phase of growth, which is likely to provoke a spike in corporate activity and favourable lending conditions, according to ANZ Group Executive, Institutional, Mark Whelan.

Speaking at The Australian Financial Review’s Banking Summit 2021, Whelan said the bounceback from COVID-19-related slowdown in 2020 would lead to a spike in gross domestic product in a number of regions.

“I think we're entering a different phase here now,” he told the event. “GDP growth is likely to continue to grow across the world. China is looking at 9 per cent [growth], in the US, it’s 6 per cent. Australia 5 per cent. Most of the European countries say 4 per cent.”

“We haven't seen that sort of synchronised and alignment of global growth for a very long period of time.”

Such growth will invigorate activity across markets which were disrupted by the pandemic-led global shutdown, Whelan said.

“If you look at M&A and IPO activity, [ANZ] is looking at about 50 ideas globally at the moment,” he said, noting it was very unlikely this would all come to fruition. “But we know of activity in M&A that will occur.”

Some talks are very well progressed, while some are just at the idea stage, Whelan said, helped by the fact “there's no shortage of liquidity anywhere”.

“And if rates are kept low for an extended period, I think you're going to continue to see this sort of activity,” he said. “I think the next 12 months to 18 months looks quite strong for growth.”

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Speaking outside the summit, ANZ MD Institutional Australia, Tammy Medard said the bank’s investment in its own business meant it was perfectly placed to help customers leverage this growth period.

“We are open for business and keen to lend, support our customers with their cash management and have the data insights they need to make decisions in an uncertain climate,” she told ANZ Institutional.

“We are the most consistent of all the banks serving institutional and corporate customers in Australia and have proven reliability in the space.”

Whelan told the AFR event that while it hadn’t quite started yet, he expected to see rising demand for corporate lending as growth heats up.

“We’ve started to see growth come through in our book more recently,” he said.  

Whelan acknowledged the cost of capital had fallen alongside interest rates across most markets, but noted how long it would remain so was “dependent on a number of factors”.

“Definitely the cost of capital is lower today, as you would expect, than it was a number of years ago,” he said. “We think it’ll stay low for the foreseeable future at least.”

Whelan said spreads were unlikely to move significantly amid high levels of liquidity and “the desire for banks to compete”.  

“I think spreads will stay down for a little while, and with base rates staying lower - if we do think the cash rate will stay low for two or three years - then cash rates would be lower.”

“I do think there will be relatively cheap money around, and margins will remain competitive,” he said. “And that's a good thing for the economy.”