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Weak overseas recovery points to a challenging 2013

Weak overseas recovery points to a challenging 2013

(20 December 2012 – Australia) ANZ chairman John Morschel is expecting a challenging 2013 with a ‘‘frustratingly anaemic’’ recovery overseas continuing to take a toll on Australia next year. Despite recent positive signs in China and the United States, Morschel said the environment facing the bank in 2013 would remain ‘‘challenging’’ as the mining boom reached its peak.

‘‘There is no question we are continuing to see a frustratingly anaemic recovery in the global economy,’’ he said.
Morschel said with mining investment expected to start declining next year, the strong dollar, high labour costs, softer commodity prices and "policy uncertainty" would all work against new resource projects.

The weaker economic environment is crimping bank profits because households and businesses are borrowing less, while bank funding has become more expensive, he said.

Morschel said the bank had kept its return on equity to between 15 and 16 percent by expanding into Asian growth markets and enhancing productivity in the bank – areas it would continue to focus on.

ANZ chief executive Mike Smith argued the bank was well positioned to benefit from the rapid growth in Asia’s rapidly expanding middle classes over the coming decade. Smith took home a A$20 million package last year.

‘‘There are enormous opportunities given Australia’s growing linkages to Asia but, at the same time we have an economy in transition as a result of a strong dollar, and weak business and consumer confidence,’’ Smith said.
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