Treasurer Jim Chalmers said last week that net overseas migration could be higher than the 235,000 forecast for 2022-23. and 2023-24. in the October federal budget, as former Immigration Department deputy secretary Abul Rizvi suggested the 300,000 figure was likely due to more international students and tourists.
“There’s still growth in the market and a lot of things are pushing it forward,” Mr Howell said. “Obviously there is inflation, but also net migration, which could exceed 300,000 – which will boost demand and help with labor shortages.”
In a strategic move to get more loans to small borrowers faster, Westpac has teamed up with Sydney-based AI firm Rich Data Co and is using its machine learning technology to predict customers’ cash flow.
It currently uses payment data, but there are plans to connect with cloud-based accounting software to allow the bank to monitor inventory levels and identify which customers may need advance credit.
Mr Howell said the biggest demand for loans came from healthcare, professional services and agriculture, after many small exporters diversified international buyers away from China following various import bans.
Companies also want the means to bring advanced manufacturing processes onshore, he said, also driven by concerns about the security of global supply chains.
Such triggers will help neutralize more cautious consumers. Westpac’s closely watched consumer sentiment index, released on Tuesday, rose 5 percent from the previous month in January to 84.3 points. The main index is now about 8 percent above its November low, but as the Goldman Sachs economics team noted, it is still about 20 percent below its long-term average.
“Confidence has softened, there’s no doubt about that,” Mr Howell said. “But the conditions are still strong. Small and medium-sized enterprises are a strong group. This is the next hurdle, but I’m cautiously optimistic that they’ll get over it.”
Research by cloud accountancy services provider MYOB, published earlier this month, found that half of SMEs fear a recession in the coming year, with fears most acute in the hospitality, retail and transport and postal sectors. About a third think Australia will avoid recession, with 16 per cent unsure either way, according to the survey.
Security of cash flow
Increasingly demanding economic conditions are forcing banks to consider alternative forms of loan insurance. The Rich Data partnership, by allowing Westpac to forecast cash flow, enables lending against expected receipts. This provides an alternative form of security to residential property, putting the family home at risk if the business fails.
Westpac will use the Rich Data system to lend up to $250,000; the bank says 30 percent of business loan applications from existing customers are now automatically approved using transaction data.
“It is very different from the typical approach of the big four banks which requires long application forms, long decision processes and looking for collateral to lend,” Mr Howell said. “This allows someone to quickly access borrowing on their cash flow to help with their short-term funding needs; and we can proactively offer credit to the right customers.”
Another risk for business bankers as people return to work this year is the future shape of central business districts. Lenders would have to work with business buyers and councils to determine the shape of high streets, central districts and office buildings, as many small retailers struggle with less foot traffic. “It won’t be the same, but we all have to work towards a form of CBD,” he said.
In a review of key themes for banks published on Monday, Goldman Sachs agreed that strong business loan growth of more than 14 percent in the second half of the last financial year will moderate. Its leading indicator of business loan growth indicated that total growth in loans to domestic businesses peaked in March at around 9.3 per cent year-on-year, before falling to 7.5 per cent by September, higher than Westpac’s forecast. .