‘Australia’s biggest issue’: fixing housing shortage, declare banking bosses

Unlocking housing growth is the golden key to Australia’s economic future, banking bosses declare in The Australian’s 2024 CEO Survey.

Australia’s top banking bosses say enabling housing is the most crucial area of reform that will drive sustainable growth across the economy and their own businesses.

Economic growth, housing affordability and social inclusion would all benefit if government’s, banks, developers and community groups all joined forces to co-ordinate moves that addressed the housing supply deficit, the banking chiefs tell The Australian’s 2024 CEO Survey.

“It is Australia’s biggest issue,” said National Australia Bank chief executive Ross McEwan, noting the country builds 50,000 less homes than needed each year.

“Affordability is at a 30-year low, and rental prices are rapidly increasing. That’s because we simply don’t have enough houses for our growing population, let alone enough affordable and social housing for people who need support,” he said.

NAB boss Ross McEwan gives testimony to House economics committee remotely in September.

Mr McEwan, who runs Australia’s largest business lender, said all levels of government needed to “urgently” collaborate on simpler and faster regulations as well as on finding “suitable” land for building.

“This issue is not just for governments to solve. Banks, developers, builders and community partners can all move faster.”

The past 18 months have seen a brutal squeeze on housing costs, as the central bank’s aggressive rate hikes aimed at quelling inflation increased mortgage rates from about 2 per cent to about 6 per cent.

That is directly hurting those who have a mortgage, which is about a third of the population, and particularly young people in metropolitan areas. The other third either owns a home or rents. Higher funding costs, lower housing supply and fractilised regulations were all exacerbating the affordability problem, the bankers said.

ANZ CEO Shayne Elliott said that for those who did not own their own home, even when they were “hardworking people” getting access to a home loan was harder “today than it has been in 30 years.”

“While many in the community are aware and concerned, no one group can solve this alone,” he said.

“The issue requires a co-ordinated strategy built for the long-term across government, banks, builders, developers, state governments, councils and others. The market won’t be able to solve this easily as distortions, including from taxes and local development laws, can exacerbate the issue.”

ANZ boss Shayne Elliott at its annual shareholder meeting in Brisbane last week. Picture: Arsineh Houspian.

In candid responses to the survey, which polled 70 leading CEOs across several industries, Mr Elliott echoed views among bankers that despite the economy proving resilient in 2023 and most customers coping with the cost of living crisis, 2024 would be a very tough year for the most vulnerable.

“My other 3am thought,” he said, referring to issues or anxieties that can keep him awake at night, “is around the current cost of living pressures.”

“We often look at the numbers, but numbers are not people. We need to make sure we think about the people who are doing it tough as inflation and interest rates remain high. And there’s an increasing number of those people – the renters, the young, the people without secure employment – who are actually in a pretty dire position. We need to support them.”

Matt Comyn, who heads the country’s largest bank, said young residents in New South Wales and Victoria were feeling the most pressure from higher housing costs.

“The Australian economy has both strong foundations and structural tailwinds, for example from its low unemployment and steady migration intake,” he said.

“However, there is near universal acceptance that housing supply and affordability remains a critical issue.”

He welcomed the Albanese government’s move to set up a performance-based $3bn fund to increase the housing accord from one million to 1.2 million new, well-located homes over five years, from July 1, 2024. But said more was needed.

“There is still a way to go and we would be supportive of additional policies which would improve housing supply in Australia,” he said.

Although acknowledging a slowdown, the bankers’ responses – posted on The Australian website – suggest optimism and predict Australia’s economy is likely to dodge a recession.

Treasury figures earlier this month forecast the economy will grow at just 1.75 per cent at an annualised rate, before starting to pick up towards the back end of calendar 2024. The slowdown is set to come about as cost-of-living pressures and higher interest rates continue to weigh on demand.

Westpac CEO Peter King said that layers of development approvals were taking too long, and therefore shortening the time it takes for developments to get off the ground would make “a big difference.”

“We need to make it easier to invest and simpler to get projects off the ground,” he said.

He said Australia needed to be smart managing and prioritising competing needs, as huge capital and inputs were also needed to fund the global energy transition.

“Every country in the world is changing their energy mix, so there’s massive global demand for what will probably be scarce resources. We need to co-ordinate the buying power of the country to get access to the materials and the labour,” he said.

“Projects underway should be completed, but we don’t necessarily want to embark on big new developments right now in case it puts further pressure on inflation.”