Economy can weather slowdown: CBA chief

Australia is better prepared than most countries to weather the global economic
slowdown, helped by the biggest boost in disposable income in the nation's history,
says Commonwealth Bank chief executive Ralph Norris.
Mr Norris said CBA economists estimated that the combination of tax cuts, lower fuel
prices and interest rate reductions had resulted in an 11 per cent boost to the
average Australian's disposable income over the past six months.
"That is equivalent to almost three annual wage increases and is by far and away the
biggest increase in disposable income, on average, in the history of Australia," he
said.
That would explain December's surge in retail sales, which had the biggest monthly
rise in eight years, or 3.8 per cent.
Mr Norris also cautioned about becoming too pessimistic about the economic outlook.
"Everybody is uncertain about the future (and) I'm not saying that we're going to be
immune to the international crisis," Mr Norris told journalists after the bank
reported its first half results.
"There's a danger in this environment that we can be too negative and that we end up
covering our thoughts in doom and gloom."
He said Australia was well prepared for the slowdown because of the 17 years of
economic growth prior to the financial crisis, 10 years of fiscal surpluses, low
unemployment and interest rates that were relatively higher and which ad room to
move lower.
The Reserve Bank of Australia from September has cut the overnight cash rate by four
percentage points, or more than half, to 3.25 per cent to levels last seen in the
mid 1960s.
The national average petrol price fell to just over $1 a litre in December and
January from over $1.60 in July, according to the Australian Institute of Petroleum.
Since then, the average price has risen to about $1.20.
The government announced tax cuts over four years in its budget last may, which it
followed with a stimulate package, which included payments made in December.
Another stimulus package is currently being debated in the Senate.
"The government should be commended for being decisive," Mr Norris said.
"The important thing here is to get a stimulus package up."
Mr Norris said CBA's economists estimated that a one-third of the December stimulus
payments had been spent, a third saved and a third was used to pay down debt.
"Paying down debt can't be a bad thing," Mr Norris said.
He said economic growth would probably be "anaemic" and the rise in unemployment
would make conditions feel like a recession.
CBA is forecasting the unemployment rate to rise to about seven per cent from
December's 4.5 per cent.