‘Who pays for all that?’: CBA small business boss queries wage hikes

Commonwealth Bank executive Clare Morgan has warned wage increases could hurt small businesses already dealing with high inflation and rising interest rates but remains confident the sector is set for growth.

Morgan, who is CBA’s small business general manager and executive, said while cost of living pressures had been topical during the federal election campaign wage increases would likely put further pressure on small businesses.

CBA executive general manager of business lending Clare Morgan.

“One of the challenges is everybody is acknowledging high costs, and higher cost of living is absolutely on the agenda, particularly with election campaign,” Morgan said.

“But the question on my mind is who pays for all of that? Where does the money come from? It’s not like there’s loads of money out there to pay for wage increases and to pay for these higher costs.”

Morgan said roughly one-in-four small businesses were not passing on the costs of higher inflation to customers, and there continued to be labour shortages and supply chain blockages related to the pandemic.

“It’s not as if we have two years of COVID now it’s done and everybody moves on. It’s actually got a long tail.”

One-in-five small businesses did not have enough staff during April, Morgan said, and low unemployment figures only meant it was more difficult to find workers.

“The data is saying unemployment is low, rates are going up because the economy is robust…but if you’re a small business owner, and you hear that, it’s not necessarily a good thing.”

However, Morgan said she wanted to “change the narrative” around the small business industry and while it was true that certain sectors were struggling, she said it had been a “very uneven experience” and many were in a strong position for growth.

“I’m really optimistic about the future,” she said. “The rhetoric around small businesses has been negative for too long. When I look at small businesses, I see passion, drive, resilience, grit. This is the story we want to bring out.”

Small businesses had built up cash buffers during the lockdown periods and were now looking to invest to grow. Morgan said demand for lending would not be reduced by rising rates, which she said remained “relatively low”.

“There’s still a huge incentive to borrow and invest,” she said. “I don’t think the cost of debt is a barrier for many small businesses,” she said, adding there had been “huge growth” in demand for asset and equipment finance.

CBA has made a push into the small business lending market in recent years, clawing market share from the National Australia Bank which remains the country’s dominant business lender.

Morgan said CBA was focused on using analytics from the bank’s enormous data pool, including customer transaction patterns and merchant terminal payments, to help businesses observe patterns and make tweaks to operations to increase cash flow.

Morgan said she did not focus on what competitors were offering, but pointed to CBA’s digital business tools to assist with functions such as payroll and rostering. “The biggest thing about small businesses is they’re time poor,” she said. “If you don’t offer great digital tools, great data and insights, you won’t be relevant.”

Both major parties have pledged to rebuild domestic manufacturing. Morgan said there was huge potential for Australian manufacturing, particularly in mining and agricultural products, and the banks could play a role through innovative financing.

She said traditional forms of finance had not met the needs of manufacturers, and CBA was promoting loans such as invoice and inventory financing. “Manufacturing is one of our target industries for growth.”

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