Australia’s economic recovery from COVID-19 has been remarkable, but taking the hands off the wheel now could derail everything, NAB chairman Philip Chronican has warned.
In a speech to the Governance Institute on Monday, Chronican warned government and business leaders against being blinded by the success of recovering from the COVID-triggered recession and losing long-term vision.
He said Australia’s “exemplary” response to the pandemic had led the country to a “critical moment in time”.
“As we enter the post-COVID recovery phase, the biggest risk to Australia today is complacency; that our success in managing COVID-19 blinds us to future risks and opportunities,” he said.
Australia’s economy has rebounded to pre-pandemic levels. GDP rose 3.1 per cent in the December quarter, and unemployment has fallen beyond expectations. The OECD has also revised up its expectations for Australia’s growth over 2021, from 3.2 per cent to 5.6 per cent.
But throughout the pandemic, government and business leaders have fallen into the belief that doing better than other economies was the same as “doing objectively well ourselves,” with Chronican saying that “now is the right time to consider what lies ahead for the long term”.
The 2020 recession – the country’s first in nearly three decades – should be utilised to “drive meaningful reform”, Chronican said.
He also warned that nearly 30 years of uninterrupted economic growth, even during the global financial crisis, led banks to become complacent, calling for lessons from the Banking Royal Commission to be heeded.
“As an industry, we learnt the hard way that sustained success allowed complacency to creep into the way we operated.”
“The Royal Commission was a necessary reset for the banking industry.”
3 long-standing problems Australia needs to fix: NAB chair
In the chairman’s view, Australia faces three key weaknesses to long-term growth: business investment and growth; the rate of improvement in living standards; and Australia’s place in the Asia-Pacific region amid geopolitical tensions.
“The first step is to look under the bonnet and recognise what’s not working as well as it should – and acknowledge any band-aid fixes that won’t last,” he said.
The solution to getting the economy revving again is simple: remove red tape so it’s “simpler and faster to do business”.
“Small business – the backbone of our economy – is spending too much time navigating multiple levels of government, holding back productivity and growth,” Chronican said, noting that small businesses spend $9.3 billion on red tape every year.
In a bid to address this issue, Scott Morrison on Monday evening announced a $120 million deregulation package slated to estimate businesses $430 million every year.
"You’ve heard plenty of people talk to you about deregulation and cutting red tape, that’s fine, but you need to have the detailed plan of what you have to change," Morrison said on Monday night.
"And to my mind, there is no real substitute for that."
In order for business leaders to commit to long-term investment, however, Chronican said they will need to first see changes to economic policy settings – and tax reform.
“Australia needs a more efficient and competitive tax and regulatory system,” he said.
“Now is the time to do more, at every level of government; to remove hurdles, streamline the bureaucracy and make our systems easy to navigate.”
The bank chairman also noted that the country would have to tackle productivity, something that was an issue before COVID-19, and was high on the economic agenda before the pandemic hit.
This will require investment in infrastructure, opening the borders to skilled migrants to fill worker shortages and facilitate business growth, and housing stock availability, which is rapidly diminishing as house prices accelerate, he said.
Furthermore, Australia will need to think carefully about its place in the Asian region, Chronican added.
China is currently, and will remain, Australia’s largest trading partner – but there is “so much more Australian business can do to capitalise on our proximity to Asia”.
“There is substantial growth in Asia, and Australia is a key partner for others in the region. That’s the basis of a healthy exchange of value.
“Whether temporary or not, a shift in manufacturing from China to other Asian economies has occurred, which could increase demand for Australian goods and resources in those countries over the long term.”
Chronican was appointed to the position of chairman to replace Ken Henry in 2019 as the big four banks reeled from the Banking Royal Commission.