'THE NATION'

GEORGE FRAZIS – Westpac New Zealand CEO
Interviewed by DUNCAN GARNER

Duncan Let's talk about the state of the economy in the wake of the AMI decision and how does the country afford this rescue package and the bail out of South Canterbury Finance for that matter? Well some say we can't afford it and we can't afford to keep bailing out bad business decisions, they say if we do we'll go broke. So how close are we to going broke? The Chief Executive of Westpac New Zealand George Frazis is with me now. Good morning Mr Frazis.

George Good morning Duncan.

Duncan Thanks for joining us, I know you’ve come from the New Zealand Australia Leadership Forum here in Auckland. What are they saying down at the Viaduct about the state of the New Zealand economy, about the confidence in the New Zealand economy?

George Duncan look it's easy for us to talk ourselves into another dip, and we've gotta be careful we don’t do that, because actually if you look at the progress over the last two years it's been extremely positive. We've done all the right things. There are a number of things that we need to push ahead on, so productivity is still really important. If you look at the difference between Australia and New Zealand and the gap over the last ten years, that was all about Australia improving their productivity at twice the rate. So that’s a focus.

Duncan But is there confidence in the New Zealand market, I mean is there a cash crisis here, or is it sort of a crisis of confidence?

George Now look there was a restructure that needed to happen. People had to reduce debt and that’s occurred. I think we're at the end of that, and by the end of the year I can see demand really picking up, so right now is the time for businesses to really be bold and invest and regain their confidence.

Duncan But your message there is you're almost telling your business customers to come to you with ideas because you’ve got money, but where are the ideas?

George And that’s what we're about. We've actually got a programme called Grow New Zealand that’s been launched, and our banks have got a toolkit to assist businesses, but it's not just about businesses, it's also about home owners. So I do encourage people to come and see us and talk about it.

Duncan But in many ways looking at 2011 so far, obviously the earthquake's a major issue here, but you know you’ve got the government's books ballooning, and huge deficits heading towards 64 billion dollars. There just doesn’t seem to be any confidence in the New Zealand market, is that what you're picking up down at the Forum?

George Well that’s what we've gotta change right? So if you look at the US which much broader issues than New Zealand does, they're all singing from the same hymn sheet, government, bankers and businesses. They're all saying the US is growing and they are growing, and they're coming out of this. We've gotta do the same thing effectively. But look at the balance sheet of the government. The government actually has improved its balance sheet over the last two years. It still needs to improve its productivity, and it still has debt capacities.

Duncan And one way to kick the economy into gear if you like would be those rural customers that you’ve got, I mean they're getting hug payouts, record dairy payouts. What are they telling you? When are they gonna start spending, because what is their spending pattern now?

George Well again I think that’s coming at the end of their deleveraging, which again was a good thing, so you know now is the time for them to start investing. But the issue is we've got to invest in productive capacity, there's no point in investing in property that actually then just doesn’t generate any productive capacity or growth.

Duncan But we keep putting this recovery off don’t we, because every time I talk to the Prime Minister he says it's coming, yet none of the official statistics show that it is here. You're talking about it being at the end of the year but it was meant to be at the end of last year. I mean how long can we keep delaying this recovery in New Zealand and survive?

George Look there's no doubt Christchurch had an impact right, the two earthquakes and it was a very tragic event and you know our thoughts go to all those that were impacted. But you know even in Christchurch we interviewed every single one of our business banking customers, there's only 2% of those that were permanently impacted, 70% not impacted at all.

Duncan 70% of tens of thousands of your business customers?

George Were not impacted right. So we've just gotta put this into perspective and really push forward in terms of the economy.

Duncan So how many permanently affected?

George About 2%.

Duncan Now how many is that, how many are we talking about there? That means they won’t come back is that what you're saying?

George Well that means they tend to be sole proprietors that have one shop in the CBD which means you know it's difficult for them to re-establish.

Duncan But what you're saying is, is that you’ve surveyed every one of your business customers in Christchurch, and 70% of them are not affected?

George Not affected. In fact in areas where the land was not impacted those values are likely to go up not down, because the demand for that will increase.

Duncan But just on that theme of you know where is this recovery and when will those rural customers start spending again, and you say it's at the end of the year. If you compare us with Australia, if you look at the Australian recovery it's bullish isn't it?

George Yes.

Duncan It's bullish compared to us. How do we do that?

George Well the difference in Australia is they get productivity improvements and they’ve had a huge impact in terms of this export, it's the biggest export boom, mining boom this century right. Now we've got a similar thing with soft commodities. What Australia's done is they’ve reinvested that into productive capacity, we've deleveraged, which is not a bad thing, but we've now gotta start investing in production.

Duncan But do you think that deleveraging, and what you're talking about there is people paying off debt, paying off their mortgages, saving, paying off their credit cards. Do you think people will actually revert and change their behaviour, or could this behaviour remain for a lot longer than even you think?

George No I think balance sheets are actually at a very strong position right now, so people will start looking for investment, because at the end of the day if you want to increase your wealth you have to invest, you have to grow.

Duncan Will 2011 be worse than 2010?

George No, I think the bottom was at the end of 2010. I think we've extended the slope here to the end of the year. If people are confident we can actually bring that forward believe it or not, but you know I'm pretty confident that demand will come by the end of the year.

Duncan But you're saying it won’t happen till next year now because of the Christchurch earthquake?

George Yes but now we should be investing.

Duncan Are they knocking down your door?

George Well I hope – they should.

Duncan Are they knocking down your door now?

George Well let me tell you, I'll give everyone my email, they can come and see me if they want to get a loan.

Duncan If you were a young man starting out your first job, and you were living in this part of the world, Australia New Zealand. Would you choose New Zealand or would you choose Australia and why?

George Look I think the prospects here are very positive right, so we've got great organisation, I think the growth rate's there to be had, it's a great lifestyle. So the balance that you get in New Zealand is hard to beat. Now Australia's good as well don’t get me wrong, but New Zealand's one of the best places to be in.

Duncan So you'd choose New Zealand ahead of Australia as young man heading into your first job?

George As a New Zealander absolutely.

Duncan Thank you very much for joining us George, I appreciate your time, and good luck at the Forum for the rest of the day.

© Scoop Media