Sir Ralph Norris may be, more or less, retired, but he's still creating a stir, chiding the Australian government two weeks ago about what could be its "somewhat mindless" quest for a surplus. Such a charge might surprise, coming as it does from a former chairman of the Business Roundtable, but Norris explains that while governments should aim for surplusses, they should not pursue them because of an election promise made in different times and circumstances.
"When things change you have to take a different view," he said. "The economy in Australia is more challenged than when that statement was made. You have to ask whether measures in the Budget could have a detrimental effect."
Norris said Europe's woes provide an example of what happens when governments run deficits over many years.
Norris is back living in New Zealand and remains active as a director of Fonterra here and of Origin Energy in Australia. Another board position will be announced shortly, he told the Sunday Star-Times shortly before receiving a Lifetime Achievement Award from CIO magazine at an event in Auckland last week.
Norris is an unusual business executive. Most CEOs rise through the ranks of finance, but his early career, before taking the reins at organisations such as Air New Zealand, ASB and Commonwealth Bank, was in information technology.
At those organisations, he built a reputation for transformation through improved customer service, through the deployment of technology and through culture change.
A focus on productivity is important, he said, adding that a lot of that is driven by the relationship between management and the people in the organisation. "Discretionary output", productivity freely given by engaged and committed staff, is a result of the quality of the culture, he said.
"If people are happy in their job and like the organisation they are likely to deliver productivity."
Over his time at Commonwealth Bank, Norris put a lot of focus on productivity measures and as a result boosted productivity by 15 percent to 20 percent.
That's important because despite regular media outbursts criticising their large and growing profits Australasia's banks work on the thinnest of margins, around 1 percent return on assets after tax, Norris said.
As has been seen around the world, it doesn't take much to lose that 1 percent. Risk management and regulation has to be strong, Norris said. Banks get into trouble through making inappropriate and risky loans.
Norris sees few threats to the banking system in our part of the world. Consumers are getting their houses in order and building the strength of household balance sheets by paying down debt.
Banks are exposed to the housing market, however, the average loan to value ratio on home loans was 52 percent and is now 42 percent. Most banks insure their lending over 80 percent through independent providers, he said.
Australian regulator APRA keeps tabs on those insurer's ability to pay while the Reserve Bank of Australia has studied the housing market and concluded home loan exposures are not a significant risk.
As to New Zealand's comparative economic performance, Norris points out that much of the Australian economy industries such as tourism, retail and manufacturing are struggling there as they are here. The difference, as always, is in resources.
Look outside of Asia, and Australia and New Zealand look pretty good, he said.
Rob O'Neill is the business editor of the Sunday Star Times.
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