Thank you very much for that kind introduction. I would like to start by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of the land we are meeting on today and pay my respects to their Elders past and present, and to all other indigenous Australians who are here with us today. And say to Johnny and Tanya and Rod and the whole team at the Circle it is always a pleasure to accept the invitation to come here. You have reminded me that the first time I did that was in 2012, which does feel like a long, long time ago.

One of the critical parts of the vision of the Business Circle is to provide a platform for debate about issues of contemporary importance. And one thing we are not short of in the current environment is issues to debate. Whether we think about global or local politics, global or local economics, global or local business issues, there is no shortage of things that we can talk about and that we can debate. 

And that really gives rise to one of the biggest challenges that we have as boards and executive teams and leaders of companies is; in an environment which is so rich with things that you could be talking about, could be thinking about, people are telling you you should be thinking about, how do you separate between all the things that you could think about and the small subsection of things that you really do need to focus your time on? 

And this is where for boards and for management teams this critical aspect of reminding ourselves that our responsibility to think, plan and act for the long term comes in. And one of the critical screens that we try and apply when we are sorting through all the things going on and working out what to focus on is what are the things that are really going to matter for the long term?

Now, interestingly, when we do that even though we are focusing on a lot of contemporary issues, increasingly what we have found at CBA is we turn back to our history. We turn back to the 105 years of the Commonwealth Bank’s history. And we do that for a couple of reasons. Number one: it puts a lot of our obsession with how difficult the current times are into historic context. We have an internal leadership program which our senior leaders attend which is named after the first Governor of the Commonwealth Bank of Australia, so somebody who had effectively the combined roles today that I have and Philip Lowe have, Sir Denison Miller. We named our internal institute after Sir Denison Miller. And while we are busy debating all the difficulties of modern times, we remind our leaders that when Sir Denison Miller was the Governor of the Commonwealth Bank of Australia not only was he sending his staff off to war but his own son died while Sir Denison Miller was the Governor of the Commonwealth Bank, at war. So one reason we turn back to our past is to actually put the current environment into perspective.

The other reason that we turn to the past is that it makes us as a management team understand that to the extent that we enjoy any competitive advantage today, the vast majority of that, the credit for that goes to the strong foundations built by our predecessors who actually set up the foundations of the franchise. And it reinforces to us our responsibility to make sure that we are strengthening those foundations for the time in the future when we as the management are gone and very quickly forgotten, and the best we can hope for is that the leaders in the future are looking back on the time that we had the temporary stewardship of the enterprise and felt that we did what we could to strengthen the foundations. So, turning to that history is a critical part of how we think about the environment that we are in today.

When we do turn to that history and we try and put the current environment into perspective there is little doubt that even against the 105 years of the Commonwealth Bank’s history there are three forces at work today in the external environment of particular significance: community expectations, global deflation and technology. And even against the history of the Commonwealth Bank, those three external forces are at a unique point. And our view is that the success with which we tackle them individually and collectively will be the largest determinant of whether or not we are successful in strengthening the foundations of the Commonwealth Bank for all the future stakeholders. 

Now, each one of those three forces could be a topic in and of itself of a lunch time talk or even more. I won’t do them justice but I will try and cover each of them individually in terms of how we think about them and what the response might be. And let me start with community expectations.

Rod reminded me and reminded us that I was up here in 2012, probably four or five months into my time as CEO, but I remember in the months after my appointment was announced in July 2011, one of the first things I did was take the opportunity to get advice from people who had been in the position before. And I had the pleasure of speaking to Don Sanders who had run the Commonwealth Bank in the 1980s, David Murray who ran the Commonwealth Bank after him, Frank Conroy who was running Westpac at a similar time, David Morgan who ran Westpac a little bit later and one of the most important architects of the environment that we are in now was Paul Keating. And amid all the good advice that I got from them, there was one common thread across all of what they told me. And they each said to me in a different way, “Bank bashing is a national sport. And the time will come at some point in your tenure as CEO where you will be dealing with that environment in which there is heightened scrutiny, heightened criticism of the banks”.

Now all that said, we would not dismiss the current environment as simply another example in the wave of periodic bank bashing. Because actually our view is that there is something different underlying it this time than there has been in the past. And there are really a couple of different factors contributing to that, some of which we have been talking about over lunch. 

The first in terms of the global social phenomenon is that we need to realise that there are a large number of people in developed markets who believe that the great promise of free markets, the great promise of free enterprise has not actually made a difference to their lives. And that is a phenomenon we are seeing right across the developed world. 

In addition to that, many of those people are looking at the banking system and particularly the predicament that the banking system put the world in from 2008, and said one of the major reasons why we haven’t felt the benefits is because globally the banking system let down the economies that it is meant to help thrive.

And thirdly, even though in Australia the banking system continued its important support of the economy, there is no doubt that Australian banks, and I certainly include the Commonwealth Bank among them, let down customers. So we are talking about a sense of global disaffection with the progress of the free market, global disaffection with banks and local concerns about the way some customers were treated. And all those aspects have contributed to what we see as a structural shift in community expectations of their banks. What was acceptable a number of years ago is no longer acceptable. People want to see a change in the actions of banks. They want to see greater transparency.

The criticism could justly be made of Commonwealth Bank, and I will let other banks speak for themselves, that it took too long for us to realise that actually expectations had changed. But let me tell you now that the amount of work being done to reflect those expectations is very, very significant, is at the top of the Board and the management agenda at the Commonwealth Bank, and is leading to change every day, every week and every month.

In addition to work that we are doing within the Commonwealth Bank, the four major banks under the rubric of the Australian Bankers Association are well progressed now in a comprehensive set of initiatives being overseen by Ian McPhee that will ensure that we raise the standards of banks to meet contemporary community expectations. 

Now, the reality is at the Commonwealth Bank customer satisfaction is higher than it ever has been. But we need to realise that increasingly we are going to be judged by the consistency of the customer experience. In other words, how the customers who are having the worst experiences are faring, not just on the overall averages.

So while we take some degree of satisfaction from the fact that we have lifted the standards for most of our customers we must redouble our efforts. We are doing that through our internal programs and we are doing that through very well progressed initiatives with the Australian Banking Association, focused on remuneration practices, focused on product design, focused on the ability of individual customers to be heard, focused on the ability of whistle-blowers to be heard. All these things are resulting in real action. And you are going to be hearing more and more about those in coming months.

As part of that you will also hear more about remediation. And some of the amounts you might hear about will be significant amounts. That’s to be expected given that we are big businesses going back in many cases more than a decade and we are erring on the side of paying if we think there is a problem. Those will be signs of an industry and its regulators doing the right thing. And you will be hearing and seeing a lot more of that activity in coming weeks and months and years.

Secondly to strength, to the global economy, to the phenomenon of global deflation. Looking back against the historic models, we cannot find a precedent for monetary policy being applied as it is today in response to weak global growth. We do know going back 100 years that low interest rate environments are very, very challenging for banks. That is a historic fact. But because models cannot model what is happening now, the models can also not tell banks or their investors or the broader economy what happens from here. And that creates an environment of endemic volatility. 

The range of views about where world monetary policy goes from here, where global growth goes from here, where economic growth goes from here is very broad. As a result of the breadth of views, small events that occur in any parts of global markets or global economy get magnified reaction because people are not sure whether it’s a sign of something they were expecting or not expecting. So as we move from the current environment which we can all agree is probably not a long-term equilibrium to a future environment, nobody is actually sure of the path that the economy will take in order for us to get there.

Now at the Commonwealth Bank, we are believers that the Australian economy is currently in a position of strength and is navigating its transition from its dependence on mining investment very successfully. We are also believers that the long term prospects of the Australian economy, given its natural resources, its human resources and its geographic position, position us extremely well for the long term. But in environments like we are in the global economy we cannot take strength for granted. We cannot just assume that economic conditions being what they are will make the bank’s balance sheet work the way it needs to work. And inevitably, boards and management teams must focus on the strength of the institution.

One of the most critical determinants of a strong banking system through economic volatility is strong predictable profits. This is the way we can make sure that we are here for borrowers, for depositors, for shareholders. It’s a critical element of a strong and stable banking system. We have heard on multiple occasions, for quite some period of time, the fact that the profits of Australian banks are as high or higher than any other banking system in the developed world. That is a fact. 

But we need to go on and ask the next question: in which economy has the banking system done a better job in buttressing the economy than Australia? Which banking system would we actually prefer to swap for the Australian banking system? The only answer that ever comes out when you ask that question is Canada. And not surprisingly Canadian bank profits are a little bit higher than Australian bank profits. So the strong stable profits of the Australian banking system is an absolutely critical part of us doing our job to prepare the Australian economy not only for the volatility of the current environment but for the opportunities ahead.

The other thing we need to realise when we are thinking for the long term is the importance of balancing the interests of our different stakeholders in a low interest rate environment. We know that our nearly two million home loan customers, our hundreds of thousands of business borrowers want their interest bill to be as low as they possibly can. But we have also got 10 million depositors. Seventy five per cent of those depositors are aged over 55. We repeatedly hear from them how many of them are dependent on the interest they get from their deposits as a critical part of determining their lifestyle. And we repeatedly hear how much pressure low interest rates put on their lifestyle.

We have also got 800,000 Australian families who own the Commonwealth Bank and millions more who own the Commonwealth Bank through their super. Eighty per cent of the Commonwealth Bank today is owned by Australia’s families. Their investment in the Commonwealth Bank is worth approximately $100 billion. Since we listed 25 years ago, each year between 70 per cent and 80 per cent of our profits have been paid out to our shareholders. In a low interest rate environment they get security out of knowing their investment is performing. They get security out of knowing their dividends are secure. And like our depositors, they are not Australia’s elite. They are Australians from all walks of life.

I can’t explain to you why somehow in the economic narrative, the impact of the low interest rate environments on depositors and on investors hasn’t received the same attention as the impact of a low interest rate environment on our borrowers who are paying all time low interest rates. What I can assure you is, even if their voice is not being represented in the public debate, it will be listened to in the Commonwealth Bank Board room and among the executive team.

The third of the major external forces is technology. And we have heard a lot about it already today. We are still of the belief that 20 years hence, 30 years hence when we look back at the time that we are in today, notwithstanding my comment about community expectations, notwithstanding my comment about the global economy, the factor that will be the most distinctive factor of our times is the level of technology change, its impact on customer needs, its impact on the customers’ desire to put themselves in control of their lives, and therefore its impact on our business models.

And we have heard a lot about the fact that as technology is changing the world, the businesses that are really going to enable that technology change are start-ups. Now we happen to believe that start-ups are a critical part of using technology to make life better for customers. They are playing a critical role in innovation. They will continue to play a critical role in innovation. But we also believe very strongly that big businesses with their assets, with their capabilities who show the intent and ability to adapt and be agile will also be a critical part of the narrative. And rather than making that point in the abstract, let me give you a very practical example.

Early in 2015, the Commonwealth Bank purchased a very small fintech business called TYME, Take Your Money Everywhere, based in Johannesburg. At the time, and it is a bit of a long story about how we found it, but we were struggling to find a way in which we could bring a full digital banking model to emerging markets, while still complying with global regulation requiring you to authenticate and identify customers. TYME had it. We partnered with them and we ended up having them as part of the Commonwealth Bank. That was early 2015.

The technology that we bought at the time is now defunct. But let me tell you what TYME, which is now 200 people based in Johannesburg is doing. TYME has innovated further and has now built a standalone machine which we called a Kiosk, which can take a person in South Africa who does not have a bank account within five minutes give them an account through which they are able to do remittances. So you go from not having an account to having an account within five minutes. The cost of doing that, roughly 15 Rand. So, just over an Australian dollar. And in case you think this is a dream, we have agreed a partnership with Pick n Pay, South Africa’s biggest retailers. We have got 500 of those machines in Pick n Pay stores as we speak. Twenty-five thousand new accounts have been opened through those machines. The number [of machines] is going up to 700. We are now thinking about how we can adapt that technology for use in our Indonesian business. And we are now thinking about how we can use that technology to disrupt our own business here and actually make life better for customers.

Now, it may be that whoever is doing my job in the future will stand here and describe that as a failed investment. But what it does stand for is that we have the intent to innovate. That we are showing demonstrable examples that we will innovate. And that we are not scared to try things. And actually our belief is that the future leaders will look at that investment and the innovation that comes off the back of it as a critical way in which the management team and Board of today strengthen the foundations of the Commonwealth Bank for the future.

So there are the three key forces. The ways in which we want to respond to them: greater fairness, greater strength, greater innovation. But as we do that really this all boils down to one area. I started today with an acknowledgement of my respects for the Indigenous people of Australia. And I will finish my remarks with a reference to another Indigenous people who I hold dear to my heart, the Tangata Whenua of New Zealand. There is an old Maori saying. The question is what is the most important thing in the world. And the answer is “He Tangata, He Tangata, He Tangata”. The people, the people, the people. 

When we describe a world in which community expectations are changing, in which the global economy is volatile, in which innovators are competing hard against us, it is easy for us to see a world of threats. The greatest source of optimism I have with the Commonwealth Bank is when I walk in branches, in business banking centres, and our onshore contact centres, and our processing areas, I see people who are excited about the prospect of doing better what they come to work to do every day, which is make life better for customers.

And ultimately, when we talk about the competitive advantage beyond the brand, beyond the technology, beyond whatever else the management team can do, the competitive advantage must always come from He Tangata, and our focus will always be an investment in the capability and pride of our people. Thank you.