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good morning vitoria over to your presentation great thank you good morning everybody so i guess i'm going to start with just some reflections over the last 12 months and as we all know new zealand was enjoying pretty favorable conditions you know the economy was in good shape i think the banking sector was in a good position despite the record low interest rates and the reserve bank's use of monetary tools let's say was comparatively benign i think it became very apparent very quickly that covert 19 would change all of that and i distinctly remember being on a call with a bank that was based in italy and they also had branches in china and they were relaying to us an excruciating detail the impacts that this virus was having and we really responded in the way that you would expect a bank to respond i guess beyond the health and safety of our people and our customers we ran a lot of scenarios or the alphabet scenarios so we had v-shaped l-shaped u-shaped we even had a fat u-shaped scenario wk you name it i think the reality is is no one really knew and so our job was to make sure that we were running lots of scenarios and understanding impact on particularly capital and liquidity to make sure that we were well placed to support our customers in the economy and we created a significant provision so we raised and today we have a provision of around 600 million i think the thing that really worked in particularly in the first sort of four months of that phase was the way that we worked together with government and the reserve bank and industry so it has been a huge combined effort from as i said the government the rb the banking sector really working hand in glove to keep the economy moving forward i think the government relief tools the bank's tailored packages and the rb obviously used virtually every monetary policy tool at its disposal so um i think the uh moving at that pace really required us to work extremely closely together we didn't always agree and neither should we but what we did is we shared all of the insight and intel that we had so that if we needed to make some adjustments we did and we could and i think the business finance guarantee scheme was actually a really good example of that where we launched that into the marketplace to support businesses as it was initially constructed we made some tweaks to make it uh more widespread in terms of its usage so i think that's a really um as i said a good example of that i think the initial focus was very much on uh from a banking perspective making sure that we helped with the flow of credit um and as we all know banks need to really i guess balance carefully that objective of this flow of credit into businesses and households but at the same time having an eye to responsible lending and making sure that it's the right decision for the long term and so we're very confident about the support we gave our customers and are still providing our customers which is a balance of frankly debt but also in many instances helping businesses re-capitalize shore up their balance sheets and have more resilient settings so i think when we sort of boil all of that down the crucial thing was really that jobs were saved uh and and quite quickly there was um initially there was a lot of fear about people losing jobs that dissipated quite quickly and so i think that's been the most distinguishing factor really of this recovery and i hear it all the time from our customers those wage subsidies really helped give employers the confidence and the courage to retain the employees despite the fact that they had very little idea of how this would play out um and i think the breathing room that banks provided for the lending deferrals the lowering of the interest rates all really played their part and what we've seen of course is that we've had a really strong rebound in retail spending and housing activity which i'll cover at a moment um but i think the reality is this level of activity can't be sustained and we're anticipating this year to be a lot more moderate the one other sort of stark observation is that this crisis has been very unusual compared to the global financial crisis which we all remember was about the lack of funds to support the economy and i think we're very fortunate position and we've learnt a lot since then banks have gone into this particular this crisis well capitalized liquidity is strong and so there hasn't been that same challenge and in fact in the first four months of the crisis we supported over 35 000 of our customers with relief on around 11 billion dollars so that was a lot of work to get that into place but it was quick and i guess the availability and the pricing of capital wasn't the issue as we stand today you might be interested to know that about 15 of our personal and business customers are still on those arrangements and so i think it's very important to sort of recognize that whilst the recovery in new zealand has been really positive we are not out of the woods and a lot of support is still required and we know globally borders are still an issue vaccines are an issue new strains are an issue and we're seeing some double-dip recessions in large parts of the global economy like europe so there's a lot to be proud of but also a lot to watch out for and so when we think about monetary policy uh wow we've seen some unprecedented changes in monetary uh policy action over the last year um you know obviously with the ocr um i guess being cut to as close to zero as the reserve bank felt comfortable doing large-scale quantitative easing to really help keep those interest rates low we've seen great initiatives from the reserve bank and the funding for lending program which they lend directly into the banks very low late rates for term debt and then just recently the reserve bank made a very helpful statement about it's continuing to reinforce that it will provide all of the monetary stimulus that the economy needs and will be ready to act if something happens i think those are really important and helpful statements and while i very much hope it doesn't come to this we also have an industry or banking industry that is now ready for negative interest rates should that be required so really the lens to this discussion that i want to bring is about how we translate monetary policy um and and how does that look when we think about our customers and we all know that monetary policy is a big it's a blunt instrument uh and it's been very effective but also creates some real challenges that i thought i would just sort of um share some perspectives on i think the first challenge really is that businesses have yet to respond so many businesses that we talk to are more concerned with having resilient balance sheet settings trying to get more clarity on what the outlook might be particularly this sort of border are we in lockdown out of lockdown kind of environment that we're going through at the moment and they really are taking more of a wait and see approach and so even though there is a lot of credit available even though the prices or the price of that credit is extremely low in comparative terms that's not enough to really encourage businesses um to really take that next step forward so i think that's the first thing that we're really keeping an eye on the second thing is deposits so obviously when interest rates really fall i mean that's the objective of the monetary policy settings it has a big impact on deposits and we know that some people are very reliant on the income that they earn from those deposits and that's been a real concern of ours is how do we balance these objectives and so actually just recently we increased our term deposit rates um by 75 basis points to really try and give that lift for some people who are highly dependent on those income sources another element of deposits is that we are seeing a large balances unusual balances sitting in accounts that have come from uh two things firstly lower levels of spending and then secondly a lot of government support so there's around 39 billion dollars worth of i would say additional deposits sitting in the system at the moment as a result of those two factors so one of the questions we keep asking ourselves is are those deposits stable and will they flow out as fast as they're flowed in um so we need to be very careful about how we think about those deposits when we manage our balance sheet settings uh as a bank so that's sort of a few of the deposit considerations i think the one that um we've all got our eye on uh is this housing market issue um you know and this is a a well-known sort of challenge the low interest rate environments have absolutely stimulated huge housing demand and it makes perfect sense you know the first home owners are realizing that they can afford a mortgage compared to rent because of the interest rates a lot of homeowners are looking to scale up or buy additional holiday home properties and then of course we have investors who for a couple of reasons a the low interest rates but b when they weigh out the risk profile of different investment alternatives they really like the land bricks and mortar so that's the real dynamic on the demand side and of course we know that new zealand's supply side challenges have been around for decades so we've really come to the crunch point last year we decided to increase the lvrs for investors ahead of the reserve bank's changes to try and sort of stem a little bit of that it didn't make enough difference uh so recently uh we um went a step further and so we're requiring a 40 lvr for investors um to be candid with you we have not yet seen the impact of that change either we are really struggling with the home loan applications that remain at record volumes so it's going to be really interesting to see this next step which is the government adding the housing market to the mandate of the reserve bank i'm really looking forward to working with the reserve bank on what ideas we can collectively think about for those or that additional mandate we're talking about dti or debt to income ratios um interest only um as another point of discussion what i'll be very focused on though is it needs to be orderly the only thing worse than the current situation would be if we had an unorderly impact so we need to be very careful when we um sort of make these changes and adjustments i guess we've also seen some great opportunities though also come from some of the initiatives around monetary policy and associated initiatives that the reserve bank's been taking and funding the funding for lending programs one that is definitely worth talking about so you know the reserve bank is direct lending into uh banks at low rates the ocr um for a term period three years um and i think that's given us a really exciting opportunity to think about what is the best way of distributing that of those funds and so at asb we've really chosen to do that and focus in on three areas firstly we think it's really important to support businesses who are trying to lower emissions to achieve new zealand's overall climate objectives secondly we really want to support infrastructure particularly infrastructure development in rural or regional new zealand and then lastly it's another way of supporting this housing or balancing that the housing challenge by supporting the supply side dynamics of the housing market and more energy efficient more affordable homes so i think that's a wonderful opportunity we want to use it really wisely to make a really long-term positive impact for new zealand which really brings me to another reflection i guess about this period is you know there's more volatility than ever before and we would like to see new zealanders and businesses think about more resilient settings so that they can weather these challenges a little bit easier than what we've seen and over the past two years actually we've been partnering with a leading university on a financial well-being framework we use our data and we observe the the behaviour if you like of customers and based on all of their transactions and this framework is based on a very simple principle i guess of managing your everyday payments or cash flows saving for a rainy day or you know events such as this and then how you're moving towards long-term goals whether you're a personal customer or a business and over the last 12 months we've seen some really interesting um parts of our data it definitely showed the reduction in spending so we see about a reduction of 17 and it also showed an increase in savings these trends that i've mentioned before and what we've seen is an aggregate around four percent but uh worryingly over the last couple of months we're seeing some different patterns emerge from that data we're seeing two things we're watching very closely the first one is an observation around people having more difficulty making payments and the second one for our personal customers is less customers have what we describe as a rainy day savings fund of a thousand dollars which is a pretty low bar so those are the two metrics that we're watching very closely and again they give us an indication that um it comes back to we are not out of the woods yet we know some businesses and some people are still doing it really tough and new zealand still needs support to really get through um this crisis so uh so i guess um you know the the key reflections i really have is we've got to work together we don't have all of the answers there was no blueprint but working together um in a very different way from the way that we've worked together in the past is really important and then how do we use um the sort of our future efforts to really try and make sure that we're supporting a stable sustainable and more resilient new zealand so so there we go i hope that's given you a few thoughts to prompt a few questions um i think the foundations that we've laid over the last 12 months um standards in good stead so anna i might hand back to you now for um to see whether there are any questions thank you so much vitoria i'm sure there will be lots of questions and what a wonderful start of course we've got the governor of the reserve bank coming up next so it was a great lead into his presentation lots of interesting issues raised there any questions from the floor that we'd like to start with i'm going to start with one inventory that's slightly tangential from your presentation but i saw it come through on slido and i thought it was an interesting question what's happening to remittances to the pacific because i guess we focus very much on new zealand um but i'm just curious what's happened to our pacific neighbours sure tangential but but a very important one uh so um i guess the issue um that uh really is occurring around the world at the moment is that financial crime has greatly increased and we all know this and we see the nature of cyber threats has elevated and really changed as well so i guess the um the whole challenge with remittances worldwide is this this crime element so a lot of processes have been added which i think have really restricted some of the flows and remittances to the pacific islands um we don't want that to be the case so we're actually working again this is another great example of how do we share data and risk data so that we can make sure that we're safely supporting that remittance activity to the islands because we know it's important for them so that's the position that we are in we need to solve for it and really make sure we're playing our part yeah thanks very much and of course it is an important issue because our friends around the world are suffering greatly from covert and particularly in developing countries we might be concerned we've all been pretty great quick to grab vaccines and grab things for our rich countries but i guess i feel pretty concerned when i look at my 21 year old daughter in north carolina who's likely to get a vaccine next month whereas our friends in india who are working in the health sector are likely to be working a long time and i guess in the pacific islands we've got some similar differences in access to health care resources and other okay let me turn to a question coming through another questio vittoria if you were running the reserve bank so take adrian's place for a moment what structural changes would you consider to improve the recovery while still managing risk of further shocks yes i'm sure you're going to ask adrian the same question what would he do if he was running asb um i need to make sure i hang around for that answer by the way adrian um i think look i'm going to the way i want to answer that question is actually to think about how we work better together and one of the real opportunities that's come up that we observed during these last 12 months is how do we share how do we get more data how do we share more data and how do we stitch our data together because the rb's um sitting on a lot of you know big macro data we sit on a lot of so if you call it the micro data and i'm not sure that we're um as joined up as we could be and therefore we might be missing um some trends we might be missing some opportunities to really understand the impact of either monetary policy settings or the way that we transmit that through the bank so um i know that um that you know there is an initiative um at the reserve bank uh and some new team members who are going to be leading that efforts and i think that's really important it's sort of the first thing i would call that is how do we use our data share our data more effectively and efficiently to for the good of the country i think the um the second thing that i would say is that um you know just staying on the topic of monetary policy for a moment it's back to how do we make sure that um i use this word orderly that we're making orderly changes and that we don't have these um unintended consequences so that we're sort of fire fighting all the time so i think we need to be very careful um in which tools are applied when and how that's sort of really a statement of the obvious but what it takes is again a lot of engagement and sharing of information and data on what's happening to see how the country is responding um you know i hope we don't need negative interest rates i've been quite public about that and um adrian and i have had some good conversations about that topic but yeah it's really important to continue to have robust debate those are the things i think are really let's make it orderly be careful about it and let's use data in a better way to support the objectives thanks and as an economist who's lived quite a bit in in japan over uh recent years um negative interest rates are a pretty interesting thing to deal with it turns quite a bit of our standard economic thinking on its head um and it's a bit difficult to grapple with we end up advocating policies that we might not normally um be thinking would be good policies um it was interesting to uh you know it came through in your presentation as a bank you've got the chance to change some of your settings the reserve bank of course is changing some of its policy settings but i was really interested in your presentation to see how you're using this as an opportunity to promote other things that you think are important and i think we've got those opportunities in a wider economy for you it was the emissions and it was the housing and the infrastructure so great okay i'm going to move on to quite a specific question victoria please have you done any stress tests on what rate of interest will lead to potential defaults and mortgages yeah so stress testing i mean as you know we run a lot of stress tests and they're becoming increasingly complicated because the um what we tend to focus on now is interrelated uh component parts of a stress test rather than single dimension because what we're seeing is when you test on a single dimension it never results in in sort of really catastrophic events it's when you actually have multi-dimensional stress tests that you really get into problem zones which really make you think about how would you solve for those so um at a total bank level um that's what we do i think a different way of answering that question around interest rates though is that i'm sure everyone's familiar we don't just lend at or test serviceability at the prevailing rate of interest we add servicing buffers so we will always be several hundred basis points um well above the um prevailing interest rate to make sure that uh that customers can service it's part of our responsible lending criteria as well so i think that's another important dynamic if you like in terms of thinking about interest rates and the impact on stress and serviceability and repayment what would be the other sort of key things that you'd look at along with the interest rates in victoria is it sort of growth rates what what are the key things that you you'd be focused on that will create stressful income employment that is that is the fundamental um uh if you were to pick one thing that matters it's employment and and i think that really sort of underpins the comment i was trying to make earlier on about new zealand's recovery the way that we were able to hold on to jobs the way that employers had the confidence to keep their people employed really really made the difference and so obviously when you're employed your ability um to to you know to borrow um i mean that's the crucial thing it's not actually the interest rates per se it's employment yeah and we certainly have kept those employment rates pretty um low what's your view on the extent to which that's just driven by the current policy settings and once those policy settings change the subsidies and so on um are we do you have a view on whether whether this is likely to blow out the unemployment numbers or do you think that we're going to be able to keep a fairly stable path i guess it gets back to your your issue of what shape recovery are we going to have yes so i do think and we know that um there are uh there are some businesses who are doing exceptionally well in fact better than before uh the pandemic started there are some businesses that um are doing very well i think the at a at a macro level um i personally we are expecting the employment level the unemployment levels to increase slightly but not to a level that's dramatic um because we've seen there's a lot of resilience um uh still to date and we will continue to support those customers that absolutely need it the most so uh so i sort of come back to you know we're not out of the woods yet new zealand still needs support but at this stage um i think um unemployment uh we're not significantly concerned about unemployment levels either today or for the remainder of the year yeah thanks for that we've got a couple of minutes left are there any questions from the floor otherwise i'll return we've got a very active online audience so thanks very much to you guys that are on online okay let me go to another question from our online audience please victoria how do you see banking changing with um fintech new models and how does that um put support or risk of financial stability and economic growth you know how do you see those factors playing in together please i think that's um you know one of the most exciting parts of the job actually which is you know all of the new uh models that are emerging in banking and and how do we really um you know frankly we just need to continue to up our game because there's so many different exciting options out there the number one concern i have is regulatory arbitrage we've observed this issue in many other major economies around the world where the prevailing incumbents are absolutely regulated and the new entrants are not and so what happens is you get a lack of innovation occurring in the in the incumbent um and you have uh the new sort of the new techs that often frankly particularly the larger ones and i'm referring to big tech here um grab a significant chunk of the value they don't pay the local taxes they don't employ people in the local economies and so we're starting to see i guess a real economic detriment from what is well intended to have lots of competition in the marketplace which is a good thing but it's not really helping the economy at an overall level so i think that's probably the most important thing a level a level playing field difficult to create that of course with new industries with regulators often playing catch up with uh with what's going on in those in those industries um just a couple of brief questions we'll go over a minute or two just because we started a wee bit late on on your session um you spoke of the increase in deposits is there any evidence that some of those might be coming from unspent government subsidies yes there is definitely yeah that's the quick answer the the government um uh it's it's a combination of the two i need to be clear though it's um obviously um there was monies that came in from the government subsidies and there's been this um reduction in spending it's the two things that work together that have resulted in the um in the higher balances yeah thanks for that um brief and insightful answer the um the last question for you vittoria before we move on to our next presenter and it's a nice lead into adrian's presentation how worried are you about the potential return of inflation um that's a watch out again this is this comes back to how do we try and move forward in an orderly way how do we not have too many sort of knee-jerk reactions or lots of change happening all at once that might impact and create an unorderly shift so i i think we definitely need to keep a watch out on it uh so much for all of those insights and that uh wonderful presentation we've certainly had some themes coming through there including the need for order when there's changes in policy settings so i guess you and your customers can adjust appropriately thanks so much wonderful presentation let's uh thank victoria and we look forward to seeing