After a protracted drought and devastating bushfires, our nation is now facing its most challenging period since the early 1900s. The economic, physical and personal impact of the coronavirus will be severe. We are dealing with a health crisis which is precipitating a significant economic shock.
Containing the coronavirus is a matter of life and death. Measures taken to slow transmission are necessary to limit the loss of life and avoid overwhelming our health system. The most vulnerable in our community are especially in need of our collective support.
The economic consequences of containing the virus are significant. They are impacting parts of our society and economy more acutely than others. Many small businesses are being forced to temporarily shut and employees are being stood-down.
Collectively we need to work together to share the impact so that we all get through the coming months and bounce back strongly.
To do this, we must retain the structural integrity of our economy and our society. This means suspending otherwise viable businesses rather than allowing them to fail, keeping businesses connected to their employees and maintaining a sense of community.
We need to do this together. I have never seen such co-operation across the business community, government and regulators.
We have seen parliament working across party lines to deliver significant measures to support those most impacted including supporting small businesses to help keep the lights on, and substantially boosting welfare support and health services.
With Australian Competition and Consumer Commission (ACCC) oversight, the CEOs of Australia’s banks have been meeting multiple times per week through the Australian Banking Association (ABA). We have agreed to allow repayment deferrals for home loans and small businesses, and today (Mon) extended support to allow all small businesses with loans up to $10 million to defer repayments for up to six months. This covers 99% of all Australian businesses.
At the Commonwealth Bank, we are doing everything we can to support our people, our customers, and the economy. We will continue to take decisive action to achieve this.
We have automatically deferred repayments for 76,000 small business customers for up to six months, helping improve their cash flows by $450 million each month. For customers with a variable rate home loan, we are also reducing repayments to the minimum, freeing up $300 million each month. This week we will process the first 30,000 applications from households to defer repayments on their home loans, improving cash flows for these households by a further $40 million each month.
We have increased our 12 month term deposit rates by 60 basis points (bps), helping all savers, but especially older Australians who most rely on their savings for income. We also lowered one, two and three year fixed rate home loans by 70bps – helping both new and existing customers take advantage of historically low rates.
Digital technology has never been more important. Through the CommBank app we have been able to connect with over 7 million of our customers and have seen over 2 million unique views of our coronavirus support page on commbank.com.au. Next month (April), we will make 250,000 proactive calls to customers who are not frequent users of digital channels, including the elderly.
We remain focused on keeping people safe, and ensuring that our branches and contact centres remain open and ready to serve customers.
The swift and pragmatic actions taken by our regulators are also playing an important role. The Reserve Bank has created a term funding facility to ensure low cost funding for small businesses.
The Australian Prudential Regulation Authority (APRA) has taken a number of steps to ensure the financial system remains strong while providing financial institutions with the flexibility to support customers through this period. The Australian Securities and Investment Commission (ASIC) has redirected resources to ensure coronavirus support is delivered well by the industry.
Despite these actions, we are facing a significant economic shock. Every business is affected, every individual is already or will be required to make sacrifices and many of our customers are already experiencing financial difficulty.
We are fortunate to have a very strong, stable and secure financial system. We have the most well capitalised banks in the world. They have substantial liquidity, which will be required to support the economy at this time. However, both the banks’ and the governments’ resources are finite and not every job or every business can be saved over the coming months.
The Commonwealth Bank will only be successful if Australia is successful, and that is why we will continue to take decisive action to support the country through this period. Individually and collectively, we all have a role to play in limiting transmission of the virus, keeping essential services operating and ensuring our economy and society remain intact so that we all rebound strongly.
Matt Comyn spoke at The Australian Financial Review Banking and Wealth Summit on 30 March 2020.
This column was originally published in the Australian Financial Review on 30 March 2020.