Young renters falling further behind wealthy homeowners

The economic gap between wealthy homeowners and younger Australians struggling to get into the housing market has deepened after the pandemic, according to the chief executive of Bendigo and Adelaide Bank, and it will widen until the central bank begins cutting the cash rate.

Handing down her final full-year results on Monday, Marnie Baker said while the vast majority of customers were ahead on their repayments, she was concerned about a growing number who were feeling squeezed under the weight of high inflation and interest rates.

Bendigo and Adelaide Bank chief executive Marnie Baker said the economic gap has widened after the pandemic. Credit: Oscar Colman

“Coming out of COVID-19 with the stimulus, the gap widened between those who are in an OK position, people who own their homes or close to owning their home [outright] … and the younger generation in the rental market or trying to get into the housing market,” Baker said. “It’s extraordinary what has happened around rentals, if you can even get a rental.”

The regional lender said consumer confidence remained very low despite the release of the stage 3 tax cuts and the federal government’s $8 billion cost of living package in this year’s budget, and that housing affordability had deteriorated.

Those conditions weighed down Bendigo and Adelaide Bank’s full-year cash profits, which slid 2 per cent to $562 million in the last financial year. It declared a full-year dividend of 63¢, up 3 per cent on last year.

Customer deposits and residential loans grew by 3 per cent to $68 billion and $60 billion respectively and customer numbers were up 9 per cent to more than 2.5 million.

The bank’s net interest margin, which compares funding costs with what it charges for loans and which is a core measure of profitability, fell 4 basis points to 1.9 per cent. Forty per cent of customers were one year ahead of repayments, and 85 per cent had maintained a financial buffer, Baker said.

Baker, who finishes her six-year tenure on Friday, said the bank was well-placed after reducing its complexity over the past few years. However, she lamented decreasing competition in the sector and she questioned the levels of ongoing regulation.

“We’ve got one of the most robust and resilient banking systems and that’s great,” she said.

“But that regulation [in the aftermath of the banking royal commission] has continued and regulation does overplay in those situations. I’m not saying we don’t need it, but what I’d like to see is proportionality of that regulation, understanding the difference between smaller, mid-tier and larger banks.”

She also said a federal review into challenges small and medium-sized banks faced should examine the order in which regulation was imposed and that it should prioritise the most high-risk issues.

“Today, should we be worried about putting investment in consumer data rights, or should we be putting that money into scams and frauds?” Baker said.

Shares in Bendigo slipped 0.5 per cent to $12.34 on Monday.

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