Latest NewsAnz : No Rush to Raise RatesThursday, 06 April 2017

ANZ is in no hurry to raise interest rates, chief executive Mike Smith says.

Mr Smith reiterated his previous comments on interest rates, saying that when the cost of bank’s fund increased, then banks must pass this on to borrowers.

‘‘At some stage, something will have to give,’’ he told a Trans-Tasman Business Circle event in Melbourne.

Mr Smith said ANZ was in no hurry to raise interest rates and would wait to see what the Reserve Bank did at next monthly board meeting on November 2.

The central bank surprised many economists, who expected a rate hike at its board meeting earlier this month, leaving the overnight cash rate at 4.5 per cent.

‘‘If there is anything to force the RBA to raise rates, it will be housing,’’ Mr Smith said.

Mr Smith observed that house prices had stabilised, but housing affordability at the bottom end of the market remained a real concern.

Offshore credit market spreads, which affect the big four banks’ cost of funding, had improved since the Greek sovereign debt crisis earlier this year, he said.

But rates still remained 160 basis points above their pre-global financial crisis levels, Mr Smith said.

ANZ still has 10 per cent of its business loan book to reprice, he added.

The Australian banks have been able to alter their margins as they repriced their business loan books over the past 18 months.

Mr Smith expects the Australian dollar will remain high over the short term, driven by Australia’s strong economy, commodity currency and high interest rate differential.

He said he expected US interest rates to hover at around zero per cent for the next 12-18 months.

‘‘I don’t think you should be in a rush to see the Aussie dollar come back to 85 (US) cents,’’ Mr Smith said.

Separately, ANZ remains in due diligence for a potential acquisition of Korea Exchange Bank (KEB)Mr Smith will accompany federal Treasurer Wayne Swan to Korea this weekend.

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