Macquarie boss says immigration will shield Australia’s economy

Macquarie Group boss Shemara Wikramanayake says Australia’s rebound in immigration and its natural resource endowments put the nation in a better position than other economies to weather a coming slump caused by rising interest rates and inflation.

Speaking to investors in Sydney on Tuesday, Wikramanayake said the market expected a “material” slowdown in Europe and America as central banks sought to rein in inflation, and Australia was not immune to the trend.

“In Australia as well, the inflation persists, and we are going to have to take action to slow the economy as part of reining that in,” she said at the Macquarie Australia Conference.

Even so, Wikramanayake said Australia’s economy had performed better than many others over the last 25 years, and she argued there were a few key reasons why it would be more resilient this time around as well.

“I think there are a few underlying and structural drivers that impact that, and I think they will also result in our having a milder downturn than big global economies,” Wikramanayake said.

Speaking hours before the Reserve Bank’s May interest rate decision, Wikramanayake said strong immigration and access to natural resources would help to shield the domestic economy.

“As you all know, immigration has really picked up again. So that is going to drive underlying growth here, which will shield us a bit from the extent of the downturn that global peers are going to have,” she said.

“We also are blessed with things like access to our own commodities in terms of responding to energy issues, and other natural resources in terms of also renewable energy and what we have in terms of advantages in things like wind and solar.”

Household spending is expected to slow this year after interest rates have surged from 0.1 per cent to 3.6 per cent since last May, but Wikramanayake said Australia’s interest rates were still lower than where they were when Macquarie held its first investor conference in 1998, when the cash rate was 5 per cent.