1 00:00:03,990 --> 00:00:06,629 Sean Aylmer: Welcome to the Fear and Greed daily interview, I'm Sean 2 00:00:06,630 --> 00:00:10,230 Sean Aylmer: Aylmer. With the reserve bank increasing interest rates three times 3 00:00:10,230 --> 00:00:12,660 Sean Aylmer: in the last three months, the cost of living pressures 4 00:00:12,660 --> 00:00:15,210 Sean Aylmer: are growing. But we're also coming off a period of 5 00:00:15,210 --> 00:00:18,000 Sean Aylmer: record low rates, and a time when Australians have saved 6 00:00:18,120 --> 00:00:21,419 Sean Aylmer: an extraordinary amount of money. Household savings have risen by 7 00:00:21,420 --> 00:00:25,050 Sean Aylmer: about $ 281 billion since the pandemic. I wanted to look 8 00:00:25,050 --> 00:00:27,060 Sean Aylmer: today at what this all means for the big banks. 9 00:00:27,060 --> 00:00:29,550 Sean Aylmer: The trends they're seeing, how mortgage holders are dealing with 10 00:00:29,550 --> 00:00:32,520 Sean Aylmer: the increases and what it means for savers as well. 11 00:00:32,760 --> 00:00:35,820 Sean Aylmer: Rachel Slate is the group executive of personal banking at 12 00:00:35,820 --> 00:00:40,530 Sean Aylmer: National Australia Bank. Rachel, so you sort of look after the retail banking 13 00:00:40,530 --> 00:00:41,910 Sean Aylmer: at National Australia bank, is that right? 14 00:00:42,180 --> 00:00:45,420 Rachel Slate: That's right, Sean. So everything to do with our personal 15 00:00:45,420 --> 00:00:49,740 Rachel Slate: customers. So all of our branches, our contact centers, home 16 00:00:49,740 --> 00:00:54,930 Rachel Slate: lending, everyday banking, credit cards, digital experiences. That's us. 17 00:00:55,410 --> 00:00:58,380 Sean Aylmer: Okay, well, thank you for joining us this morning. I 18 00:00:58,380 --> 00:01:00,990 Sean Aylmer: want to jump into some of those areas, but first 19 00:01:00,990 --> 00:01:05,400 Sean Aylmer: off we have had falling interest rates for so long 20 00:01:05,700 --> 00:01:09,090 Sean Aylmer: and in the last little bit... Certainly this year interest 21 00:01:09,090 --> 00:01:11,759 Sean Aylmer: rates have started to rise again. Now we expected that 22 00:01:11,760 --> 00:01:15,030 Sean Aylmer: to happen for a bit longer than the last three months. 23 00:01:15,750 --> 00:01:20,399 Sean Aylmer: How have consumers at face value changed their behavior recently 24 00:01:20,400 --> 00:01:21,990 Sean Aylmer: as a result of the rate rises? 25 00:01:22,560 --> 00:01:25,050 Rachel Slate: Yeah, it's a great question, and one we are looking 26 00:01:25,050 --> 00:01:28,740 Rachel Slate: at. Customers, how they're spending, how they're saving and also 27 00:01:29,459 --> 00:01:31,740 Rachel Slate: how they're thinking about their home loans. And as you 28 00:01:31,740 --> 00:01:36,570 Rachel Slate: say, a long time... 11 years is a long time. 29 00:01:36,900 --> 00:01:38,880 Rachel Slate: Lots of us who work in banking have feel like 30 00:01:38,880 --> 00:01:40,949 Rachel Slate: we've been waiting half our careers for that to happen. 31 00:01:41,130 --> 00:01:41,190 Sean Aylmer: Yeah. 32 00:01:41,550 --> 00:01:43,530 Rachel Slate: And I think the important point is for lots of 33 00:01:43,530 --> 00:01:47,670 Rachel Slate: customers, this is their very first experience of rising rates. 34 00:01:48,000 --> 00:01:51,510 Rachel Slate: As you say, lots of savings over the last couple 35 00:01:51,510 --> 00:01:55,290 Rachel Slate: of years. And so for the majority of customers, they're 36 00:01:55,620 --> 00:01:58,920 Rachel Slate: in a good spot. So lots of customers are ahead 37 00:01:58,920 --> 00:02:02,040 Rachel Slate: on their repayments. More than 70% of our customers are 38 00:02:02,040 --> 00:02:05,580 Rachel Slate: ahead on repayments. And the average, and average is a 39 00:02:05,580 --> 00:02:07,650 Rachel Slate: dangerous... And we should talk a little bit about that. 40 00:02:08,730 --> 00:02:13,080 Rachel Slate: The average pay ahead in our portfolio it's there or 41 00:02:13,080 --> 00:02:17,370 Rachel Slate: thereabouts right across the industry as customers are 48 months 42 00:02:17,370 --> 00:02:21,300 Rachel Slate: ahead on their home lending repayments. Now the other thing 43 00:02:21,300 --> 00:02:23,610 Rachel Slate: we are seeing of course going on is you talk 44 00:02:23,610 --> 00:02:26,220 Rachel Slate: about cost of living and those pressures are real for 45 00:02:26,220 --> 00:02:31,020 Rachel Slate: a lot of customers. So energy prices, fuel prices. We 46 00:02:31,020 --> 00:02:35,070 Rachel Slate: are seeing and only just starting to see customers change the 47 00:02:35,070 --> 00:02:38,610 Rachel Slate: mix of how they're spending. So we're certainly seeing some 48 00:02:38,610 --> 00:02:42,300 Rachel Slate: customers start to pull back on some of those more 49 00:02:42,300 --> 00:02:47,190 Rachel Slate: discretionary expenses like your classic, Uber eats, you're streaming services. 50 00:02:47,190 --> 00:02:48,960 Rachel Slate: Probably some of those things that got a little bit 51 00:02:48,960 --> 00:02:54,540 Rachel Slate: more familiar during lockdowns. We're starting to see that. I 52 00:02:54,540 --> 00:02:58,200 Rachel Slate: wouldn't say we are seeing wholesale changes yet into how 53 00:02:58,200 --> 00:03:02,790 Rachel Slate: customers are behaving, but lots of curiosity would be... That's 54 00:03:02,790 --> 00:03:05,910 Rachel Slate: probably the word I would use to describe how people 55 00:03:05,910 --> 00:03:06,899 Rachel Slate: are feeling at the moment. 56 00:03:14,160 --> 00:03:14,161 Sean Aylmer: And the data from this is coming through debit cards, credit cards, that type of thing? 57 00:03:14,161 --> 00:03:17,160 Rachel Slate: Yeah, that's right. So we and our economics team look at spend data right across 58 00:03:17,160 --> 00:03:21,930 Rachel Slate: the market and the industry, as well as across states, across 59 00:03:21,930 --> 00:03:26,190 Rachel Slate: categories. We've seen some good recoveries in areas like retail 60 00:03:26,190 --> 00:03:29,430 Rachel Slate: and hospitality, clearly, they had a long way to come 61 00:03:30,060 --> 00:03:30,810 Rachel Slate: back from. 62 00:03:31,169 --> 00:03:33,810 Sean Aylmer: Yeah. It's interesting we've had interest rates rise by a hundred... Well, 1. 63 00:03:33,810 --> 00:03:39,270 Sean Aylmer: 3%, 130 basis points in the last three months. Personally, 64 00:03:39,750 --> 00:03:41,790 Sean Aylmer: I get a letter from my bank and saying, you 65 00:03:41,790 --> 00:03:43,710 Sean Aylmer: have to pay more. And it worries me though. I 66 00:03:43,710 --> 00:03:48,119 Sean Aylmer: probably haven't stopped my spending patterns yet, but I'm thinking 67 00:03:48,120 --> 00:03:50,250 Sean Aylmer: about it. And it's kind of what you've just described. 68 00:03:50,790 --> 00:03:54,090 Sean Aylmer: Sounds a bit like for a lot of people... But 69 00:03:54,090 --> 00:03:57,390 Sean Aylmer: over the next six months, particularly rates keep rising, personally, 70 00:03:57,390 --> 00:03:59,910 Sean Aylmer: I will have to actually cut back on my spending and 71 00:03:59,910 --> 00:04:00,930 Sean Aylmer: probably lots of people will. 72 00:04:01,470 --> 00:04:04,800 Rachel Slate: Yeah. And that's what we're hearing from customers. I mean 73 00:04:05,160 --> 00:04:08,100 Rachel Slate: the other thing... And why I use the word curiosity, 74 00:04:08,100 --> 00:04:10,020 Rachel Slate: we do have a lot of customers, you might be 75 00:04:10,020 --> 00:04:14,430 Rachel Slate: one of them, Sean, who over the last few years 76 00:04:14,460 --> 00:04:18,359 Rachel Slate: haven't adjusted your repayments actually as rates have come down. 77 00:04:18,570 --> 00:04:22,830 Rachel Slate: Yeah. So we're also helping some customers understand that they're 78 00:04:22,830 --> 00:04:26,100 Rachel Slate: paying ahead. A lot of customers kept paying ahead. They 79 00:04:26,100 --> 00:04:29,370 Rachel Slate: do have some capacity there as well. They have choices 80 00:04:29,820 --> 00:04:33,570 Rachel Slate: to make about changing their spending or indeed adjusting their 81 00:04:33,570 --> 00:04:36,719 Rachel Slate: repayments. We're seeing lots of visits to where we've got 82 00:04:36,720 --> 00:04:39,900 Rachel Slate: all the information on NAB. com, about how customers... How 83 00:04:39,960 --> 00:04:42,630 Rachel Slate: to think about how far ahead you are, whether you've 84 00:04:42,630 --> 00:04:45,570 Rachel Slate: got redraw, whether you're paying ahead, how to adjust your 85 00:04:45,570 --> 00:04:49,140 Rachel Slate: repayments. As well as clearly looking at budgeting and spending. 86 00:04:49,140 --> 00:04:52,620 Rachel Slate: And that's obviously becoming more interesting to a lot of 87 00:04:52,620 --> 00:04:53,251 Rachel Slate: customers as well. 88 00:04:53,251 --> 00:04:57,540 Sean Aylmer: Okay, Rachel. So I appreciate that people have a buffer 89 00:04:58,050 --> 00:05:00,779 Sean Aylmer: in their home loans, they've built up savings, but at 90 00:05:00,779 --> 00:05:05,010 Sean Aylmer: some point it kind of must hit homes that draws 91 00:05:05,010 --> 00:05:08,250 Sean Aylmer: down and people start changing their behavior. 92 00:05:08,640 --> 00:05:12,330 Rachel Slate: Absolutely. And as I said earlier, talking about averages is 93 00:05:12,330 --> 00:05:17,099 Rachel Slate: always dangerous because there are customers in different situations. I 94 00:05:17,100 --> 00:05:20,549 Rachel Slate: think the other dynamic that's clearly going on and it's 95 00:05:20,820 --> 00:05:24,599 Rachel Slate: started slowly. It's going to go on over the next 96 00:05:25,290 --> 00:05:28,710 Rachel Slate: 18 months. A lot of customers who are coming to 97 00:05:28,710 --> 00:05:30,900 Rachel Slate: the end of very low fixed rate loans. 98 00:05:30,901 --> 00:05:31,441 Sean Aylmer: Yeah. 99 00:05:31,529 --> 00:05:34,080 Rachel Slate: And then making a decision about what to do next. 100 00:05:34,080 --> 00:05:37,979 Rachel Slate: Interestingly, we've done some research about how customers are thinking 101 00:05:37,980 --> 00:05:41,610 Rachel Slate: about that change and thinking about whether it's the right 102 00:05:41,610 --> 00:05:45,120 Rachel Slate: time to refinance. And we've got a large number of 103 00:05:45,120 --> 00:05:49,170 Rachel Slate: customers in the market considering refinance. But interestingly, it's sort 104 00:05:49,170 --> 00:05:53,850 Rachel Slate: of split between re- fixing or moving onto a variable 105 00:05:53,850 --> 00:05:56,220 Rachel Slate: loan. And of course that depends, what's important to you. 106 00:05:56,279 --> 00:06:00,510 Rachel Slate: So is it certainty or flexibility? I think you've got 107 00:06:00,600 --> 00:06:04,110 Rachel Slate: rising rates, which clearly is going to impact through two 108 00:06:04,110 --> 00:06:07,289 Rachel Slate: repayments. And then you've got this shock for a lot 109 00:06:07,290 --> 00:06:09,480 Rachel Slate: of customers who are going to be coming off fixed 110 00:06:09,480 --> 00:06:13,260 Rachel Slate: rates. So I think the combination of those two things 111 00:06:13,260 --> 00:06:17,279 Rachel Slate: over the next, probably 6 to 12 months, we'll start 112 00:06:17,279 --> 00:06:19,171 Rachel Slate: to see customers change their behavior a little bit more. 113 00:06:19,171 --> 00:06:21,900 Sean Aylmer: Stay with me. Rachel, we'll be back in a minute. 114 00:06:27,990 --> 00:06:30,510 Sean Aylmer: My guest this morning is Rachel Slay, group executive of 115 00:06:30,510 --> 00:06:34,710 Sean Aylmer: personal banking at National Australia Bank. Did you see much 116 00:06:34,710 --> 00:06:36,929 Sean Aylmer: customer behavior change during COVID? 117 00:06:38,310 --> 00:06:44,010 Rachel Slate: Well, during COVID we saw clearly offset balances really increase. 118 00:06:44,070 --> 00:06:47,670 Rachel Slate: And you mentioned that high amount of savings in the 119 00:06:47,670 --> 00:06:50,700 Rachel Slate: system, a lot of that went into offsets. And clearly 120 00:06:50,700 --> 00:06:53,219 Rachel Slate: people were spending their money on different things when they 121 00:06:53,220 --> 00:06:58,529 Rachel Slate: were spending. So no travel, no restaurants and lifts, and 122 00:06:58,529 --> 00:07:02,850 Rachel Slate: other kinds of spending. We've seen customers really start... And 123 00:07:02,910 --> 00:07:05,820 Rachel Slate: maybe not during COVID, but certainly in the last six 124 00:07:05,820 --> 00:07:11,730 Rachel Slate: months, lots more interest in spend tracking, budgeting tools. So 125 00:07:11,850 --> 00:07:15,870 Rachel Slate: I think customers are starting to prepare really for this 126 00:07:16,380 --> 00:07:18,930 Rachel Slate: thing that's happening at the same time. This emergence from 127 00:07:18,930 --> 00:07:22,590 Rachel Slate: COVID. Starting to see some pressure and cost of living. 128 00:07:22,890 --> 00:07:27,750 Rachel Slate: And obviously now, what was talked about is the rate rises 129 00:07:27,750 --> 00:07:29,640 Rachel Slate: that were going come in the future here right now. 130 00:07:30,660 --> 00:07:34,890 Sean Aylmer: Yeah. Just moving on to the rate rises, we've talked about home loans 131 00:07:34,890 --> 00:07:38,850 Sean Aylmer: obviously, but what about term deposits? There has been very 132 00:07:38,850 --> 00:07:41,940 Sean Aylmer: low returns for term deposits because interest rates have been 133 00:07:41,940 --> 00:07:45,690 Sean Aylmer: so low. They are rising now. Is there more interest 134 00:07:45,870 --> 00:07:47,730 Sean Aylmer: in term deposits yet? Or is it too early? 135 00:07:48,540 --> 00:07:51,510 Rachel Slate: Yeah, I think again, a mix... And you can see 136 00:07:51,510 --> 00:07:54,540 Rachel Slate: right across the market in any customer that's looking for a 137 00:07:54,660 --> 00:07:57,360 Rachel Slate: term deposit at a term that suits them, obviously. Because 138 00:07:57,870 --> 00:08:01,020 Rachel Slate: the term can be anything from three months out to 139 00:08:01,140 --> 00:08:04,080 Rachel Slate: as long as you want to fix for. So, there 140 00:08:04,080 --> 00:08:06,989 Rachel Slate: is some availability in the market. We haven't seen a 141 00:08:06,990 --> 00:08:10,290 Rachel Slate: big shift yet at the consumer end of the market. 142 00:08:10,650 --> 00:08:14,280 Rachel Slate: And I think that's because customers are... There's a little 143 00:08:14,280 --> 00:08:18,000 Rachel Slate: bit of wait and see, because there's a really clear 144 00:08:18,000 --> 00:08:21,420 Rachel Slate: expectation. You only need to open the paper. Particularly as 145 00:08:21,420 --> 00:08:24,210 Rachel Slate: it gets towards the beginning of every month at the 146 00:08:24,300 --> 00:08:27,540 Rachel Slate: moment, that rates are going to keep rising. I think there's 147 00:08:27,540 --> 00:08:30,750 Rachel Slate: a little bit of caution. And of course, if you're 148 00:08:30,750 --> 00:08:33,930 Rachel Slate: a homeowner you're offset still a much better bet. 149 00:08:34,860 --> 00:08:38,130 Sean Aylmer: Yeah, because you're paying a higher interest rate on the 150 00:08:38,130 --> 00:08:41,430 Sean Aylmer: loan than you're getting in a term deposit. Credit cards. 151 00:08:41,670 --> 00:08:43,830 Sean Aylmer: I haven't used a credit card for years. I lived 152 00:08:43,830 --> 00:08:45,570 Sean Aylmer: on credit cards and then I kind of moved onto 153 00:08:45,570 --> 00:08:49,110 Sean Aylmer: a debit card. And that was that. Do what's happening 154 00:08:49,110 --> 00:08:51,150 Sean Aylmer: in credit? Do people still use credit cards like they 155 00:08:51,150 --> 00:08:53,040 Sean Aylmer: used to, and I'm going to ask the same question 156 00:08:53,040 --> 00:08:54,810 Sean Aylmer: about ATMs and things post COVID. 157 00:08:55,410 --> 00:08:58,140 Rachel Slate: Sure, so credit cards. Yeah. Do they use them like 158 00:08:58,140 --> 00:09:01,410 Rachel Slate: they used to? No, but do they use them? Absolutely. 159 00:09:01,500 --> 00:09:05,550 Rachel Slate: So there are 16 million credit cards in the hands 160 00:09:05,550 --> 00:09:11,010 Rachel Slate: of Australians. It's still a very popular way to pay 161 00:09:11,490 --> 00:09:13,980 Rachel Slate: and for different cohorts of customers. And of course there 162 00:09:13,980 --> 00:09:18,330 Rachel Slate: are new propositions emerging in the market as well. Our 163 00:09:18,360 --> 00:09:22,740 Rachel Slate: most popular credit card actually is a no interest card 164 00:09:22,740 --> 00:09:27,030 Rachel Slate: that we launched about 18 months ago. Low limits, no 165 00:09:27,030 --> 00:09:30,300 Rachel Slate: interest with a monthly fee. So it's solving that spot, 166 00:09:30,300 --> 00:09:33,750 Rachel Slate: particularly for young customers that want transparency and certainty that's 167 00:09:33,750 --> 00:09:38,160 Rachel Slate: really popular. But equally the more premium cards in the 168 00:09:38,160 --> 00:09:41,969 Rachel Slate: market... Rewards... Still very popular way to pay. But as 169 00:09:41,970 --> 00:09:46,829 Rachel Slate: you say, the growth in debit, huge over the last 170 00:09:46,830 --> 00:09:51,390 Rachel Slate: 10 to 15 years and really powered by that convenience of contactless payments. 171 00:09:51,660 --> 00:09:54,330 Sean Aylmer: And Rachel, what about ATMs? What's the usage are you seeing in those? 172 00:09:56,130 --> 00:09:57,569 Rachel Slate: It's a bit of a mix. One of the things 173 00:09:57,570 --> 00:10:01,860 Rachel Slate: we are seeing a little bit more is customers embracing 174 00:10:01,920 --> 00:10:04,980 Rachel Slate: ATMs to do more than just withdrawing cash. So could 175 00:10:04,980 --> 00:10:09,570 Rachel Slate: be depositing cash, depositing checks and things like that. And 176 00:10:09,570 --> 00:10:13,740 Rachel Slate: aside from ATMs, we're seeing customers use other services like 177 00:10:13,860 --> 00:10:17,400 Rachel Slate: bank at post. So we support that. It's really important 178 00:10:17,400 --> 00:10:20,969 Rachel Slate: for customers, particularly in regional and rural Australia, as well 179 00:10:20,970 --> 00:10:24,510 Rachel Slate: as. Three and a half thousand post offices across the 180 00:10:24,510 --> 00:10:28,080 Rachel Slate: country that provide a lot of the same things that 181 00:10:28,080 --> 00:10:32,130 Rachel Slate: you might have typically gone to an ATM for. There's 182 00:10:32,520 --> 00:10:35,280 Rachel Slate: definitely less ATMs around the country than there would've been 183 00:10:35,280 --> 00:10:37,559 Rachel Slate: a few years ago and that's really in responding to 184 00:10:37,559 --> 00:10:39,059 Rachel Slate: how customers are behaving. 185 00:10:39,390 --> 00:10:44,400 Sean Aylmer: And finally on Fear and Greed, we've spoken a lot about the buying and pay later 186 00:10:44,490 --> 00:10:49,980 Sean Aylmer: sector. Previously and installment pay. And Commonwealth bank has gotten 187 00:10:49,980 --> 00:10:52,530 Sean Aylmer: into that area. Apple pay has gotten into that area. 188 00:10:52,710 --> 00:10:55,559 Sean Aylmer: Plus there's the outer pay says all, et cetera, zip 189 00:10:55,559 --> 00:10:58,770 Sean Aylmer: code, et cetera. Where's national Australia bank on that. 190 00:11:00,120 --> 00:11:02,910 Rachel Slate: Yeah. Great question. I mean, what we definitely know is 191 00:11:03,360 --> 00:11:07,260 Rachel Slate: that way to pay... Forget about the brand for a 192 00:11:07,260 --> 00:11:10,199 Rachel Slate: minute. That way to pay is really popular with customers. 193 00:11:11,309 --> 00:11:14,970 Rachel Slate: That pay in four, or using installment payments to manage 194 00:11:14,970 --> 00:11:17,939 Rachel Slate: cash flows. So we've got NAB now pay later coming 195 00:11:17,940 --> 00:11:22,230 Rachel Slate: into the market very soon. We've got, pre- registration open 196 00:11:22,350 --> 00:11:24,990 Rachel Slate: for customers at the moment. It's a little bit different 197 00:11:24,990 --> 00:11:27,959 Rachel Slate: to some of the other offers in the market, in 198 00:11:27,960 --> 00:11:30,510 Rachel Slate: that firstly, you need to be a NAB customer because 199 00:11:30,510 --> 00:11:31,710 Rachel Slate: we want to know who you are. 200 00:11:31,950 --> 00:11:32,100 Sean Aylmer: Yep. 201 00:11:32,130 --> 00:11:35,640 Rachel Slate: Secondly, we're doing a full credit check and then thirdly, 202 00:11:35,730 --> 00:11:39,300 Rachel Slate: we don't have any fees, no late fees and clearly, 203 00:11:39,630 --> 00:11:43,410 Rachel Slate: no interest. For us, it's really responding to that need 204 00:11:43,620 --> 00:11:46,380 Rachel Slate: from customers. They want to pay that way. We'd rather 205 00:11:46,380 --> 00:11:48,690 Rachel Slate: them do it with us. We think it's safer and 206 00:11:48,690 --> 00:11:50,939 Rachel Slate: more secure for them. So coming soon. 207 00:11:51,360 --> 00:11:53,730 Sean Aylmer: Fantastic. Rachel, thank you for talking to Fear and Greed. 208 00:11:54,179 --> 00:11:55,350 Rachel Slate: Thanks Sean. Have a great day. 209 00:11:55,830 --> 00:11:58,829 Sean Aylmer: That was Rachel Slate group executive of personal banking at 210 00:11:58,830 --> 00:12:01,410 Sean Aylmer: National Australia bank. This is the Fear and Greed daily 211 00:12:01,410 --> 00:12:04,530 Sean Aylmer: interview. Remember you should get professional advice before making any 212 00:12:04,530 --> 00:12:07,530 Sean Aylmer: investment decisions. Join us every morning for the full episode 213 00:12:07,530 --> 00:12:10,620 Sean Aylmer: of fear and greed. Australia's most popular business podcast. I'm 214 00:12:10,620 --> 00:12:12,120 Sean Aylmer: Sean Aylmer, enjoy your day.