The pace of change across our lives is seemingly constant, throwing old certainties and approaches - and sometimes orderly progress - to the side, requiring us to navigate an ever evolving set of circumstances.

Events from Covid to the Ukraine conflict to surging inflation and the spiralling cost of living emerge in apparent succession, demanding new approaches and fresh thinking to manage their myriad challenges.

These disruptions to our status quo are also overlayed with deep rooted trends and thematics, including relentless technological innovation and the imperative of decarbonisation.

It undoubtedly makes for a challenging environment for government, businesses and our wider society – requiring understanding of the likely impact of these changes and how to position for the future.

And the role of banks in supporting our customers through this world in constant flux has never been more important.

Key issues

About 12 months ago I gave an address to the Trans-Tasman Business Circle and a number of themes I covered then continue to develop and some new ones have come to the fore.

Digitisation has morphed into Artificial Intelligence or Generative AI - a new tech frontier with enormous productivity opportunities, but with a dark side and fears for its social impact that require careful policy control.

Globalisation – the underlying basis of most advanced economies – has been tested. Global supply chains failed during the pandemic, reopening debates around domestic self-sufficiency and the onshoring of production.

Inflationary pressures continue to reverberate, driving a monetary policy tightening cycle that few foresaw and both adding to a cost of living challenge.

We know that the increased cost of living falls disproportionately on the young – with housing affordability a very real concern. This will require a collaborative approach between the public and private sectors to reinstate the attainability of home ownership.

Uncertainty around interest rates also fuels volatility in capital markets, making capital harder to access and increasing funding costs. Access to skilled labour is another priority issue for businesses.

The banking sector has an important role to play in helping our clients navigate many of these issues.

Global trade

Trade disruption caused by the pandemic and Ukraine conflict saw new trade patterns emerge.

Globalisation is realigning. An example was the pivoting of trade to India from China when they closed their market for many products and commodities. Although the signs are that normal trade flows between China and Australia are resuming alongside an improvement in governmental relations.

But economic and security decision are becoming more intertwined. Concerns over regional instability is fuelling silicon chip production in the US to counterbalance the world’s current reliance on Taiwan.

There’s also a strong focus on sustainable supply chains – both from a risk management perspective, as well as ensuring that suppliers have sustainable operations.

Despite it being heralded as a trend, onshoring of production has not happened in any meaningful way – at least in Australia.

There have been significant changes in inventory management, as businesses navigated supply chain disruption – moving from ‘just in time’ inventories to ‘just in case’.

The build-up of inventories has also coincided with a softening in the retail environment. Stressed cash flows are leading to a slowdown in the payments cycle and a flow on effect across the business ecosystem and a knock-on effect to the economy.

Banks like CBA are well positioned to assist businesses with these issues and through the cycle with working capital solutions.

Financing the transition

One of the most complex and evolving areas – and where banks have an absolutely crucial role – is in the energy transition.

The numbers to deliver this transition are astronomical – some may say an impossible task - so it is an issue we need to lean into now. Already our 2030 targets of a 43% reduction in emissions and 82% renewables are in view. It’s worth bearing in mind our emissions in 2005 were the same as they are today, yet in 7 years we have to reduce these by 43%.

The global cost is immense - estimated by the International Energy Agency at US$100 trillion by 2050 – and banks have a crucial role in helping to allocate capital to support the transition.

We estimate Australia’s transition to a net zero emissions economy will require $2.5-$3 trillion of investment to 2050 - similar in scale to the investment in Australia’s “mining boom” in 2005–2015.

But getting to a net zero Australia is no mean feat and we’re running out of time. In 1985 38% of the world’s energy was from coal. In 2022 it was 37%.

Decarbonisation has many challenges and opportunities and it will take a concerted effort to get there:

  • getting critical minerals (lithium, cobalt, nickel, copper, manganese) out of the ground and moving down the value chain by processing and capitalising on this green materials boom;
  • rapidly transforming the grid by building new forms of generation, transmission and storage.
  • developing different sorts of renewables. Offshore wind will take time to come on line and will be expensive and pumped hydro is expensive and complicated.
  • improving the storage capacity of batteries and ensuring we have the right economic incentives in place to provide firming capacity.
  • cost and challenge of transmission from production to where it will be consumed – a lot of our renewables are in places that are not mapped to the grid.
  •  shift in modes of transport, such as electric vehicles for road; hydrogen for shipping and some long-haul transport.
  • decarbonising or offseting what can’t be reduced.

Our landowners will need to sequester over 100Mt p.a. of carbon through land use and we will need to deliver new technologies (e.g. carbon capture and storage) to capture a further ~100 Mt p.a. Unlocking natural capital to sequester carbon and restoring our natural habitat and bio-diversity will also become increasingly important.

As I mentioned, renewables will need to play a significant role. The AEMO Integrated System Plan (ISP) forecasts 83% of generation coming from renewables in 2030-31. In 2022 renewable energy accounted for 35.9% of total generation. We will need nine times the current variable renewable capacity installed by 2050 – this means tripling capacity by 2030.

We will also need to treble the firming capacity of dispatchible storage, hydro and gas fired generation to firm renewables. The ISPs optimal development pathway has called for 10,000kms of new transmission.

To build these future capabilities we need to recognise:

  • it may be inflationary in the short to medium term as demand out strips supply for critical resources and skills.
  • it will require Federal and State policy incentives to decarbonise (e.g., safeguard mechanism, in international markets carbon border adjustment mechanism).
  • subsidies to allow technologies to develop (e.g. safeguard fund) and build shared infrastructure (e.g. Rewiring the Nation).
  • development of new technologies (e.g., long-duration storage, CCS, long-haul low-carbon transport).
  • and shifts in consumer preferences.

A successful transition must also maintain economic and energy security. Australia’s economic security and energy security has historically been highly dependent on fossil fuels. Credible pathways to net zero see a rapid transition away from coal, and a diminished but ongoing role for gas.

As Australia’s largest financial institution, CBA will play an essential in the transition. This means supporting a purposeful and coordinated transition to net zero that protects energy and economic security, that allows our business and retail customers to embrace the significant opportunities but also avoid the risks, particularly those associated with a disorderly or disruptive transition.

We see Australia as uniquely placed to capitalise on the opportunities given the nation’s abundance of renewable energy resources, deep pools of capital and skills to support the transition.

Digitisation, data and AI

Development of digital capabilities continues to be a key strategic priority for our Institutional Banking & Markets clients.

Artificial intelligence is also poised to play a transformative role, delivering more personalised, seamless experiences for our customers and employees.

Alongside some legitimate concerns around this technology, there are also massive opportunities to improve productivity and service standards.

AI has been a core strategic focus for CBA for a number of years. We use it to deliver more personalised, seamless experiences for our customers and employees. For example in our retail banking business:

  • AI has played an important role in fraud reduction
  • In predicting bills and forecasting cash flows so customers can stay ahead
  • In connecting customers to unclaimed benefits and grants
  • In personalising digital offers to help customers save money while they shop.

CBA has been running machine-learning models for decades, as many banks have, so already have a very robust framework and governance in place. We have also played a leadership role helping shape Australia’s responsible AI framework.

As we roll out AI to applications across the bank we continue to be committed to the responsible use of data and AI, with fairness, safety and transparency vitally important to us.

Data & analytics is another area of real strength for CBA and our CommBank iQ joint venture with Quantium is able to provide valuable and almost real time insights to our clients using our aggregated and de-identified payments data – which accounts for approximately 40% of all consumer transactions in Australia. In a constantly changing environment, this is a huge benefit in guiding business and investment decisions.


Despite aggressive monetary policy tightening, inflation remains stubbornly high. We are conscious that a number of Australians are feeling the strain of the rising prices, rising interest rates and the economy more broadly.

In addition to providing support to our retail customers where possible, our IB&M business also has an important role in helping governments and businesses manage inflation and interest rates, access to capital markets.

Inflation remains too high in most advanced economies and 1-2 more increases in central bank interest rates are expected including in Australia and the US, although market is pricing in a series of cuts through CY 2024. Elevated market volatility creates ongoing challenges for clients and opportunities for us to support them in managing risk and accessing capital.

Housing affordability

Our recent CommBank iQ Cost of Living Insights Report showed the impact of the cost of living being felt most keenly by young people in their late twenties.

Housing affordability and availability is a huge issue nationally and for young people in particular and CBA is focused on assisting to solve the housing accessibility challenge.

There is considerable evidence that a current under supply of dwellings in Australia will become more acute given the projected growth in population in coming years. The National Housing Financing & Investment Corporation forecasts a net undersupply of dwellings relative to household formation of 106,300 dwellings over the five years to 2027. CBA estimates this could require an estimated $75 billion over this period to build enough dwellings to house all Australians or residents who will need one - and banks have a critical role in providing this funding.

Beyond these issues, as a nation we need to look at productivity and where and what we are spending in the economy, with the National Disability Insurance Scheme and Defence both increasing their share of our overall budget.

Other key issues for Australia

We need to redefine our critical industries and exports to balance our reliance on commodity exports.

Along with all advanced economies, Australia needs to focus on social investment and our care economy, to ensure our healthcare and aged care sectors are adequately funded. Increasing levels of defence spending are also required.

CBA is also focused on supporting better outcomes across our communities, as part of our purpose of ‘Creating a brighter future for all’ – this includes providing tailored financial services for marginalised communities.

I’m also proud that CBA is proactively supporting the Indigenous Voice to Parliament campaign, and we are guided in this by our CommBank Indigenous Advisory Council, which has representation from some of this community’s most influential voices. This commitment is underpinned by our own Reconciliation Action Plans which progress targets across our operations.

So in summary the pace of change continues undiminished and the role of banks has never been more vital in supporting our customers with their challenges and opportunities.

Ladies and gentlemen, thank you for listening.

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