Australian business strength is shocking even its biggest lender

THE resilience of corporate Australia to rising interest rates has taken traders and economists by surprise in recent months. Now, the boss of the country’s biggest lender to businesses said he’s been caught out too.

Business credit growth is currently “surprisingly surprising on the upside”, National Australia Bank chief executive officer Andrew Irvine said on Thursday (May 2).

“If you’d asked me six months ago as previous head of the business and private bank whether we would have printed nearly 9 per cent business credit growth, I would have said ‘no chance’ and yet here we are,” Irvine said.

The health of Australian firms has been reflected in sticky inflation and an ultra-tight labour market, alongside house prices that are seemingly impervious to high borrowing costs. Money markets have quickly switched from pricing in strong chances of an interest-rate cut from the Reserve Bank of Australia this year to now ascribing about a 50 per cent chance of another 25-basis-point increase to 4.6 per cent in November – a level last seen in 2011.

Irvine, just weeks into his CEO role, called out industries including minerals, mining, agriculture, defence, health care and even manufacturing – which he said has enjoyed a renaissance as supply chains re-domicile closer to clients – as among the “large parts of our economy doing really well”.

“Candidly we overemphasise the difficulties in our economy and those that are struggling, and underemphasise the portions of our economy that are doing well,” Irvine said.

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The comments from the bank boss come even as he implored households and individuals struggling with bills to be proactive about talking to the lender about any potential mortgage stress. BLOOMBERG