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Speaking remotely (due to a bout of COVID-19) at the House of Representatives standing committee on economics for its review of Australia’s four major banks yesterday (13 July), Commonwealth Bank of Australia’s (CBA) CEO Matt Comyn stated unemployment is one of the three key drivers of mortgage stress across lending books.
“By far the biggest increase in terms of the reason why someone will be unable to continue making repayments is a change in their employment circumstances,” Mr Comyn said.
Mr Comyn further stated that beyond unemployment, the other contributors to mortgage stress tend to be serious illnesses and a change of familial situations or relationships.
“Clearly with the employment market, remaining very strong in a vast majority, almost all of our customers continue to work and they’re just feeling pressure right across the board,” Mr Comyn added.
“Not just for rising rates, but also as that’s flowed through into higher energy prices, higher groceries, and we do think that that will continue to weigh on consumer consumption expenditure over the course of the year.”
He added that with the rapid change in cash rate and rental increases, “approximately two-thirds of households are clearly feeling more pressure on household budgets”.
Labour market resilience
With unemployment sitting at 3.6 per cent according to the latest Labour Force data released by the Australian Bureau of Statistics (ABS), Mr Comyn commented that the resilience of the labour market is “something overall to celebrate”.
“I think the resilience has probably surprised us a little as well,” Mr Comyn said.
“Obviously last month, the last labour and employment data are 3.6 per cent, it was a bit stronger than we were expecting.”
He speculated that unemployment data along with the quarterly consumer price index (CPI) set to be released later this month (26 July) would probably be the two main data points that will feed into the Reserve Bank of Australia’s (RBA) decision making around interest rates in August.
“Clearly the labour market has remained resilient. We don’t see that certainly deteriorating particularly quickly,” Mr Comyn stated.
“We were probably expecting an unemployment rate above 4 per cent by the end of this year. That may end up being sort of too pessimistic.”
However, Mr Comyn commented that the major bank expects to see the economy slow over the course of the year as more and more households come under pressure for people with mortgages and more acute pressure across renters.
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