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'Anemic' global recovery takes local toll: ANZ

ANZ Bank’s chairman, John Morschel, says a ‘‘frustratingly anemic’’ recovery overseas will continue to take a toll on Australia next year, with industries in the economy’s slow lanes likely to remain weak.

Despite recent positive signs in China and the United States, Mr Morschel said the environment facing the bank in 2013 would remain ‘‘challenging’’ as the mining boom reached its peak.

‘‘There is no question we are continuing to see a frustratingly anemic recovery in the global economy,’’ he said.

With mining investment expected to start declining some time next year, Mr Morschel said the strong dollar, high labour costs, softer commodity prices, and ‘‘policy uncertainty’’ would all work against new resources projects.

‘‘At the same time, there is little evidence of the weaker sectors of the economy such as retail , housing and manufacturing recovering sufficiently to pick up the slack,’’ he said. ‘‘Together with weak business and consumer confidence, this leaves overall business conditions in the economy softer.’’


On Monday, ANZ economists predicted the  Reserve Bank would be forced to slash the cash rate from 3 per cent to 2 per cent next year in response to such weakness, and Mr Morschel said growth would be more ‘‘subdued’'.

The weaker economic environment is crimping bank profits because households and businesses are borrowing less, while bank funding has become more expensive.

Mr Morschel said the bank had kept its return on equity to between 15 and 16 per cent by expanding into Asian growth markets and enhancing productivity in the bank – areas it would continue to focus on.

ANZ’s chief executive Mike Smith – who reportedly took home $20 million last year – argued the bank was well positioned to benefit from the rapid growth in Asia’s rapidly expanding middle classes over the coming decade.

More than one fifth of the bank’s revenue came from overseas, including its Asian network.

However, he added that Australian industries such as tourism and retail would face a ‘‘difficult adjustment’’ over the coming years.

‘‘There are enormous opportunities given Australia’s growing linkages to Asia but, at the same time we have an economy in transition as a result of a strong dollar, and weak business and consumer confidence,’’ Mr Smith said.