“As long as interest rates are lower than trend growth, the cost of servicing the debt will fall as a proportion of GDP, and the debt burden will fall as growth picks up.”
Bendigo and Adelaide Bank CEO Marnie Baker said the federal budget deficit and sharp rise in government debt were “both affordable and necessary, and helped by Australias AAA credit rating and record low interest rates”.
Ms Baker said the flip side of low borrowing costs was low deposit rates, “which is a huge challenge for savers including self-funded retirees”.
What is most important now is ensuring as many people as possible can find and keep meaningful employment and that has got to be right at the heart of Australias economic policies.
Andy Penn, Telstra CEO
Another banker, National Australia Bank CEO Ross McEwan, said Australia was fortunate to go into the COVID-19 crisis with low levels of government debt.
“We now need to transition from support to stimulus, to strengthen the economy and create growth and jobs,” he said. “Then well need to tackle the deficit.”
Mike Henry, who became CEO of BHP Group in January this year, said Australia needs to have a “mature national conversation on the most pragmatic way to deal with the legacy of public debt left by the unprecedented COVID-19 crisis response”.
“In the 2010s, fiscal austerity programs around the world proved more self-defeating than cleansing my hope is that we will see policies that accelerate the growth in nominal GDP as the key pillar of any fiscal adjustment strategy,” he said.
“Such policies must be designed to support the durable success of both domestic and export-oriented sectors, and be calibrated for maximum effect in terms of international competitiveness and global market access.”
Coca-Cola Amatil CEO Alison Watkins said stimulus measures such as JobSeeker and JobKeeper had been “very impactful”, but were not sustainable.
“A thoughtful and measured approach from government to ongoing stimulus will be important,” she said.
“Strong indications will provide confidence that government recognises the need for carefully targeted support to continue over time, with a focus on the critical challenge of driving economic recovery via business investment and the creation of jobs.”
Telstra CEO Andy Penn said we should not necessarily worry about budget deficits if they are achieving the right outcome.
“What is most important now is ensuring as many people as possible can find and keep meaningful employment and that has got to be right at the heart of Australias economic policies,” he said.
Several CEOs expressed concern about the impact ultra-low interest rates will have on asset prices.
ANZ Banking Group CEO Shayne Elliottsaid an extended period of ultra-low rates can lead to issues as it changes the way businesses and people assess risk.
“The idea of low rates is to encourage spending and risk-taking to spur growth, but history says it can lead to too much risk-taking as people push the envelope to generate returns,” he said.
“This means banks and regulators have an important role to play ensuring customers take reasonable risk, but not too much that only ends up costing more later. So we support low rates but they do impose different challenges for us all.”
Macquarie Group chief executive Shemara Wikramanayake says the risk of not stimulating the economy is greater than that posed by ultra-low interest rates.  
Commonwealth Bank of Australia CEO Matt Comyn showed a similar level of concern about potential asset price bubbles.
“The long-term economic consequences of very low interest rates are yet to be determined,” he said.
“Customers reliant on their savings are very negatively impacted and we need to be mindful about the potential for asset price inflation as people seek returns from riskier assets.”
Medibank Private CEO Craig Drummond and Macquarie Group CEO Shemara Wikramanayake said there had to be a balance between rescuing the economy and pumping up asset prices.
“There is no doubt central bank stimulus has distorted asset values, but this is a preferred path to the downside case of a serious recession or indeed a depression,” Mr Drummond said.
Ms Wikramanayake said: “We are mindful that very low interest rates result in further asset appreciation; however, in the near term the risk of not stimulating the economy is greater.”
Susan Lloyd-Hurwitz, who is CEO of Mirvac, one of the country’s largest residential developers, said low interest rates are helping drive up house prices and this will make it imperative for increased supply of housing stock.
“This recovery in housing prices looks set to continue into 2021, so it will be important for housing supply to resume a steady pace, given expectation of borders reopening and migration steadily resuming in the next one to two years,” she said.
“Imbalances in supply/demand will exacerbate house prices, resulting in affordability pressures potentially becoming a widespread issue again in the not too distant future.”
AMP’s CEO Francesco De Ferrari worries that low interest rates will lead to heightened risk-taking and contribute to rising inequality.
“Due to low returns on cash, many investors and retirees are turning to riskier investments, often at a point in their lives when it might not be appropriate to do so,” he said.
“Were facing a once in a generation environment that risks widening the social divide between rich and poor.
“In that regard, it concerns me that no one has yet landed an accessible and effective advice model to support Australians with quality, affordable financial advice, that meets the new regulatory environment.”
Jayne Hrdlicka, Virgin’s new CEO, echoed Mr De Ferrari’s concerns about rising inequality.
“Of course, I am concerned about some of the long-term, long-lasting effects of the pandemic and the policy response,” she said.
“For example, unemployment due to the pandemic has disproportionately affected youth, especially those in more disadvantaged regions and circumstances, as well as women and households with young families.
“Targeting stimulus at groups most affected can provide positive short and long-term effects.”

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