Macquarie all talk on infrastructure investment

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ScreenHunter_4472 Oct. 14 07.32

By Leith van Onselen

Macquarie Bank chief, Nicholas Moore, has today urged both the public and private sectors to take advantage of the most favourable debt funding conditions in years to invest in growth-­enhancing infrastructure. From The Australian:

The comments ramp up a push from business for infrastructure investment to spur the sluggish economy and long-term growth…

“As the economy in Australia transitions away from mining investment, we are at the same time in a low-cost-of-capital environment, which presents a good ­window for infrastructure op­por­tunities,” said Mr Moore…

While Mr Moore’s comments make sense – well-targeted infrastructure investment offers the joint benefits of supporting growth as the mining investment boom unwinds and raising longer term productivity benefits and living standards – one wonders why Macquarie is not practicing what he preaches?

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As reported in June, Macquarie has been aggressively growing its mortgage book, which grew in size by around 50% over the two years to May to $17 billion. This growth had reportedly come from “offering higher incentives to mortgages brokers” and “having advanced accreditation under the Basel rules, [thus] lowering the capital needed to write loans”.

Mr Moore also flagged at the time his ambition to grow Macquarie’s mortgage book to pre-crisis levels of $25 billion.

So rather than fulfilling its role as the broker of high risk, high return productive investment, Australia’s only home grown investment bank is instead pursuing mortgages with vigor and shunning business investment in favour of less productive housing investment.

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It sure would be nice to see a bank chief practice what they preach for once.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.