New: financial assistance hub
19 February 2021
Interviewed by the ABC AM’s Peter Ryan, ABA CEO Anna Bligh discusses the 91% of borrowers that have resumed their deferred repayments, and the impact of the end of JobKeeper payments.
TRANSCRIPT SPEAKERS: ABC AM’s Emily Bourke, ABA CEO Anna Bligh, ABC Senior Business Correspondent Peter Ryan
Emily Bourke: Deferrals or pauses on bank loan repayments have been a critical lifeline during the COVID crisis, preventing many homeowners and businesses from going to the wall. But the Australian Banking Association says although 91% of borrowers have now resumed repayments, it’s clear that some won’t survive as banks start calling loans in. The end of the loan deferral scheme coincides with the withdrawal of JobKeeper late next month. But the Association’s Chief Executive, Anna Bligh, maintains there won’t be an economic shock when the emergency support pulls back. Anna Bligh spoke with our Senior Business Correspondent, Peter Ryan.
Anna Bligh: Ultimately, you know, this is going to be a tough year and that’s why banks have come together, taken the decision that they should be as upfront as they can with their customers about what the next six to nine months looks like. If they are not able to be making payments at the end of March, nobody is going to fall off a cliff. These processes take some time and it can take, you know, six, seven months before hard decisions get reached.
Peter Ryan: But are you saying that in some cases banks won’t be able to avoid foreclosing on loans or kicking people out of their homes or businesses?
Anna Bligh: Well, we’re coming out of the worst economic downturn that the country has seen in 100 years or more. And it is not possible, I think, for us to get to the other side of that without, unfortunately, some casualties. But it will be the job of every bank to make sure that they minimise that. If it gets to the point where customers are starting to lose equity in their homes, then that is a very bad financial outcome for that customer. But yes, I do think there will be some people who will have to face the very hard and painful decision of doing the right thing by selling when they still have equity and money that they can take out and keep their head above water.
Peter Ryan: The end of the loan repayment deferrals coincides with the end of JobKeeper, so two big pieces of emergency stimulus ending. Are you concerned that there could be a shock or at least a significant blip when that happens?
Anna Bligh: No customer is going to wake up the day after the 31st of March and find that there is some legal action being taken by their bank on their loan. But no, people are not going to fall off a cliff. Their banks will be working with them. For some people, in some circumstances, they may get another small period of deferral. Others may be expected to pay something, but not everything. Yes, those two things coincide, but there is not about to be a big shock at the end of the deferral period.
Peter Ryan: But was there any debate, concern or consideration about maybe separating the end of the deferrals with the end of JobKeeper to avoid any risk of a shock.
“we’re coming out of the worst economic downturn that the country has seen in 100 years or more. And it is not possible, I think, for us to get to the other side of that without, unfortunately, some casualties. But it will be the job of every bank to make sure that they minimise that”ABA CEO Anna Bligh
Anna Bligh: Notionally or nominally those two dates with JobKeeper and bank deferrals coincide, but in practice that is not how it’s going to work. Every customer will be expected to talk with their banks and find a solution, but it’s not going to be a solution that will be found overnight. These processes in banks often take several months and customers can expect that banks will be very patient as we go through this process.
Peter Ryan: Banks have been reporting steady profits, but also big reductions in customers on deferrals while predicting the economic recovery is underway. So are banks now in a better position to not only survive this, but to get ready for the next crisis?
Anna Bligh: Banks are now in a much stronger position should we see any second round or third round of economic downturn. I think we’re all hoping not to see that, but if it does happen, yes, banks are in a much stronger position, just like they were at the beginning of 2020. They’re not quite back to where they were, but they are starting to build back and that’s important. We want our banks to be strong and resilient, because I think what COVID taught us is you never know what’s around the corner.
Emily Bourke: Anna Bligh, Chief Executive of the Australian Banking Association, speaking with Peter Ryan.
“This is about engaging with the entire banking ecosystem in order to ensure the accessibility of the sector’s services are best serving our diverse community now, and into the future.”
“What is underpinning this bank failure is a number of things, but not least of all, it’s a very niche bank with high exposure to one part of the economy. And that’s the part of the economy that’s been quite volatile and troubled”
The Treasurer has indicated that the federal government is closely monitoring the situation.