Smith warns on mining boom, hits out at IMF
(27 November 2012 – Australia) The International Monetary Fund (IMF) should take a better look at troubled United States and European banks instead of suggesting Australian banks need to be better capitalised, according to ANZ chief executive Mike Smith.
Last week the global fund IMF said Australia's big four banks should hold more capital because of their market dominance and the implicit guarantee of taxpayer support could threaten the economy.
''The IMF probably got a little app, plugs in the numbers and spits out something,'' Smith said.
He said banks needed to be highly leveraged to provide loans at a reasonable rate, and warned consumers and businesses could be hit with ''exorbitant'' interest rates if banks were forced to hold more assets like normal business.
Speaking at a business lunch, Smith said the boom in Australia's resource exports to Asia had masked weakening fundamentals in Australian economy. He also cautioned the surge in mining investment over recent years was not sustainable.
''Our research highlights up to two-thirds of projects that have been on drawing boards are clearly not going to make it in the foreseeable future,'' he said. ''The cost, completion and relative return risks are simply becoming too great and there is a flight to quality.''
Smith welcomed the government’s Asian Century white paper, and is pursuing an expansion of ANZ into Asia, with the aim of generating nearly a third of the bank's earnings from the region within the next five years.
''The IMF probably got a little app, plugs in the numbers and spits out something,'' Smith said.
He said banks needed to be highly leveraged to provide loans at a reasonable rate, and warned consumers and businesses could be hit with ''exorbitant'' interest rates if banks were forced to hold more assets like normal business.
Speaking at a business lunch, Smith said the boom in Australia's resource exports to Asia had masked weakening fundamentals in Australian economy. He also cautioned the surge in mining investment over recent years was not sustainable.
''Our research highlights up to two-thirds of projects that have been on drawing boards are clearly not going to make it in the foreseeable future,'' he said. ''The cost, completion and relative return risks are simply becoming too great and there is a flight to quality.''
Smith welcomed the government’s Asian Century white paper, and is pursuing an expansion of ANZ into Asia, with the aim of generating nearly a third of the bank's earnings from the region within the next five years.
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