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A new report by financial infrastructure giant, Depository Trust & Clearing Corporation (DTCC) found 68 per cent of respondents felt geopolitical risk and trade tensions were the top threat to the financial system, up from 49 per cent last year.
It comes as tensions around the world continue to impact global markets, with the federal Treasurer recently noting that “a lot of the global uncertainty is ahead of us rather than behind us.”
The survey also found 61 per cent of respondents identified inflation as a top threat, up from 34 per cent last year, which represents the most significant jump across all risks.
The key reasons for concern were the uncertainty around how long inflationary pressures may last, as well as the impact of monetary policy and supply chains.
Australia’s inflation reached 6.9 per cent in September, which marked a slight fall from the month prior, but remains well above the Reserve Bank of Australia (RBA) target 2 to 3 per cent range.
Thus, the central bank has indicated further hikes to the cash rate are expected in 2023, after already raising the rate 300 basis points (bps) in 2022 to 3.1 per cent.
The board noted in its December monetary minutes that “some further strengthening in inflation was expected in coming months”.
It’s expected that inflation will peak in 2023 before the slowdown in economic growth and rising interest rates will bring inflation back down by 2024.
Westpac’s economist Bill Evans said the sharp economic slowdown in 2023 will be partly engineered by the need for the RBA to continue lifting the cash rate in the first half of 2023 as wages growth and inflation remain uncomfortably high.
However, Mr Evans acknowledged that inflation and wages may fall much more quickly than the bank envisages, allowing the RBA to bring forward the rate cuts and avoid the last hike (to 3.85 per cent) that it anticipates for May.
Conversely, inflation in 2023 may be “stickier” than expected, Mr Evans said. In this scenario, he noted that the RBA may be unable to cut rates in 2024, therefore, “condemning the Australian economy to another very difficult year with weak growth and no prospect of any interest rate relief”.
Cyber risk threat ramps up
In addition to the threats of economic uncertainty, 2022 has shone a light on cyber risk on the back of major data breaches of large organisations such as Optus and Medibank along with the thousands of scams reported from individuals, scammers and hackers that have plagued Australians throughout 2022.
The Australian Cyber Security Centre saw over 76,000 cyber crime reports in the 2021–22 financial year, which revealed an increase in scams by 13 per cent.
In November, Minister for Financial Services and Assistant Treasurer, Stephen Jones, addressed the Customer Owned Banking Association (COBA) on the surge of scams and data breaches seen in the country and warned that the trust of Australians can be shaken in regard to large organisations protecting their data.
Mr Jones said that in October 2022, the Australian Competition & Consumer Commission (ACCC) had received the “highest number of scam reports for any month” in the year, with around 22,300 reports made and reportedly $50 million lost.
Contrary to the rise in attacks, 47 per cent of respondents rated cyber risk as a top threat — a decrease from 59 per cent last year.
This was driven by the growing sophistication of threat actors, the proliferation of new technology adoption and an increasingly interconnected marketplace.
Managing director and chief information security officer at DTCC, Ajoy Kumar, said the cyber threat environment continues to evolve and staying ahead of the threats is a neverending job.
“As cyber security threats continue to grow, firms must evolve their approach to cyber security to concentrate on resilience,” Mr Kumar said.
“Financial institutions should expand their focus from identification, detection, protection to swiftly respond and safely recover.
“Financial market infrastructures must not only adapt to these threats, but also rapidly respond and safely recover its operational capabilities to facilitate fair and orderly markets.”
[Related: Top 5 scams to avoid this festive season: Assistant Treasurer]
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