Phase two of the crisis

In a briefing yesterday ANZ's managing director, Mike Smith, described the global financial crisis as now being in "phase two, where we are seeing bad debts emerge from the commercial sector, and from higher risk personal customers.  

"The third phase, which I think we'll see more clearly in the second half of this year, and into 2010, as unemployment rises, will be rising bad debts among mainstream personal customers.  

"It's also fair to say that the previous benchmarks which became accepted after 17 years of continued strong economic growth are now completely unrealistic.  We're now moving to what I see as a more normalised benchmark or benchmarks in the more normal economic conditions, where, frankly, good companies will still continue to succeed, but where bad companies will fail."

Reiterating a theme raised in a speech last week, Smith adopted a change in tone and said, "I'll buck the trend at this point and say that I do have some renewed optimism, despite the fact that 2009 and 2010 aren't going to be particularly pleasant.  

"While I still believe that there will be a slowdown in Australia, I believe it may not be as deep and as protracted as many now fear, and that's good news in the context of the rest of the world."