Westpac chief backs Reserve Bank in talking the dollar down
Westpac chief executive Gail Kelly has backed Glenn Stevens' campaign to talk down the Australian dollar, saying the high currency continued to obstruct the expansion plans of many businesses.
With business lending growing more slowly than the bank expected at its results last month, Mrs Kelly said the high dollar was one of the biggest challenges facing business customers.
The dollar plunged to a four-month low of less than US90¢ on Friday after Mr Stevens said he would prefer to see an exchange rate of about US85¢.
It was the first time the central banker has provided an explicit target level for the exchange rate, and Mrs Kelly said Westpac shared the governor's view.
"We would accord with that," she said.
A lower currency would bolster confidence and economic activity, she said, by making manufacturers, retailers and tourism operators more competitive.
"It's clearly one of the biggest negative factors that many of our customers have to deal with and it's been persistently high for some period of time so they've coped with it really well," Mrs Kelly said.
"But it does remain still a factor that actually offsets confidence and customers aren't willing yet to actually invest in the future. So a low dollar, great for our customers and good for the economy."
The comments follow a push by the Reserve Bank to "jawbone" financial markets into lowering the dollar, culminating with Mr Stevens on Thursday saying he thought an exchange rate of US85¢ would be "closer to the mark" than US90¢.
Mrs Kelly made the remarks after Westpac's annual meeting in Melbourne, at which she also said business credit was growing more slowly than expected.
The bank had previously forecast annual business credit growth of 2 to 3 per cent, but Mrs Kelly said it may be closer to 2 per cent, as higher confidence had not yet translated into more borrowing. Business borrowing is expanding at just 1.4 per cent a year.
Despite a slower than expected start, chairman Lindsay Maxsted reiterated the bank's view that it expected a "modest" lift in activity in 2014
With the industry preparing for the most significant inquiry into the financial system in close to two decades, Mr Maxsted said over-regulation was one priority for Westpac, amid an "extraordinary wave" of recent rule changes.
"Given the very important role banks play in the community, it is important to fully assess these changes and their appropriateness to our markets," he said.
"It is similarly important that these developments, along with their implementation timetables, do not carry with them unintended consequences or place our system at a comparative disadvantage to international peers."