‘Money was never going to be free forever’: Borrowers can withstand higher rates, says Westpac

“I think the important thing to recognise is that we’ve been through a long period of ultra-low interest rates, so this is a natural reversion to some degree,” he said.

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“The money was never going to be free forever, and most businesses we talk to knew that. And what we’ve seen people do during particularly the COVID period, is work very hard at building their own resilience.”

Westpac will on Monday release a new survey of more than 500 small businesses, which suggests the rising cost of living is the biggest concern for small firms, followed by worries about inflation, rising rates, and COVID-19-related disruptions.

Most firms believed the economy would rebound further over the next year, but de Bruin said one area that could slow was discretionary spending, such as at restaurants.

“We’ve had a little bit of a mini-boom in hospitality, which has gone well. We see that being sustaining, but some of the heat may come out of that as the cost of living goes up. So that’s the part to watch,” he said.

As mortgage lending slows, business lending is a critical battleground for banks, and Westpac is this week announcing a partnership with accounting giant MYOB, which will give eligible bank customers access to the accounting software.

While banks have generally played down the potential for mortgage stress, the Australian Prudential Regulation Authority chairman Wayne Byres last week said people who had taken out ultra-cheap fixed-rate loans could face “repayment shock” and said falling house prices could compound the difficulty for some borrowers.

The risk of bad debts has also emerged as a concern for bank investors, though recent research from Citi’s Brendan Sproules argued the major banks still had excess provisions to withstand a “reasonable significant deterioration” in the economy.

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