NAB boss warns on housing affordability as house prices rise

National Australia Bank boss Ross McEwan says the Australian dream of home ownership probably feels further away for many, warning that a shortage of homes is one of the biggest problems facing the nation.

At NAB’s annual general meeting in Sydney on Friday, McEwan noted that despite the economy slowing this year under sharply higher interest rates, house prices continued to climb, sharply reducing housing affordability.

For many seeking the great Australian dream of home ownership, he said, “it likely now feels further away.”

“We haven’t built the number of homes required for our growing population. It is one of the biggest problems facing the country right now. There has been some action, but we need to work faster to free up tracts of land and build homes,” McEwan said.

The weakening economy remains a key risk for bank investors, but McEwan said Australia would avoid a recession and that few of the bank’s customers needed financial help, even though it had been a challenging year.

NAB boss Ross McEwan said he was optimistic about a recovery in Australia’s economic growth.Credit: Peter Rae

“It’s clear the 13 increases to the cash rate are being felt by homeowners, but it is often
Australians who don’t own their home facing the greatest difficulty,” he said. “Rental prices have risen about 10 per cent, while the cost of energy, food and other essentials have jumped. For those on low incomes, these cost increases have been particularly significant.”

NAB chair Philip Chronican said while Australia was in a good position, the economy was slowing with the economic environment uncertain amid new and emerging risks.

“We’re cautiously optimistic about the future, but also alert to the geopolitical tensions and the impact that these may have,” he said.

McEwan said the bank’s margins remained under pressure amid intense mortgage competition, and that despite a strong year overall, conditions deteriorated in the second half of the financial year amid higher inflation and costs.

“Competition in home lending has been as tight as I’ve seen in my time in Australian banking,” he said. “We expect 2024 will remain challenging, reflecting slower economic growth, ongoing higher inflation and continued competition.”

Despite some worried business owners, McEwan said business conditions were “above average” and that he remained optimistic about a recovery in Australia’s economic growth.

“With demand for our natural resources and strong employment and migration, Australia’s
economy is well positioned to improve in the second half of next year,” he said.

NAB also fielded questions from shareholders about its climate policy.

Despite the board recommending shareholders vote against a resolution asking the bank to expand the application of its policy to stop financing companies lacking an emission reduction plan by 2025, about 28 per cent of proxy votes were in favour.

While NAB’s policy currently applies to upstream oil and gas, metallurgical coal mining and coal-fired power generation companies, the shareholder-initiated resolution called for the commitment to be extended to fossil fuel infrastructure and service companies.

Market Forces researcher Kyle Robertson said it was “completely reasonable” for all fossil fuel companies to have a credible emissions reduction plan by 2025, and that the results of the vote on the resolution needed to be taken seriously.

“If the board received a 28 per cent strike against remuneration, it would be doing everything in its power to address shareholders’ needs,” he said.

Chronican said NAB acknowledged climate change was a significant risk to the planet and that while it was “reasonable to take the necessary time” to implement policy changes, the board recognised the need to further develop its approach in relation to transition plans and assessments.

NAB also received questions from Tiwi Islanders about the bank’s decision to finance Santos, which is looking to develop a gas project off the coast of the Tiwi Islands, and whether the bank would commit to meeting with Tiwi people following a commitment from Westpac’s chief executive Peter King to do so on Thursday.

McEwan said it was “absolutely appropriate” to engage in conversation with Indigenous people and Islanders when banks were involved in major developments such as those proposed by Santos. “We’re very happy to have those conversations,” he said.

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