‘Single biggest issue’: Bank boss says Labor needs to deliver on housing

National Australia Bank boss Andrew Irvine has urged governments to boost their efforts to lift the supply of new homes, warning that lower interest rates and support for first-time buyers could pump up prices unless more dwellings are built.

Irvine on Wednesday backed Labor’s plan to expand assistance for first home buyers with deposits of as little as 5 per cent, saying it would help to get some people into the property market. But he also emphasised, as other bankers have, that the main game should be building more dwellings.

National Australia Bank chief executive Andrew Irvine says housing is the biggest issue facing the nation.Credit: Dominic Lorrimer

NAB chief economist Sally Auld said this week that she expected 1.5 percentage points of rate cuts in the next year, and Irvine said lower borrowing costs could add to the “firepower” of homebuyers. But last month the housing industry seized on ABS figures showing the number of new homes that commenced construction last year was the lowest in more than a decade.

Irvine said “Economics 101” suggested that if demand for homes increased while supply did not, it would simply drive up home prices.

“If all we do is stimulate demand-side factors and don’t get more dwellings under construction,
you’re not going to get more Australians into homes because there are no more homes for them to move into,” he said, as NAB reported $3.6 billion in first-half profits.

Federal Labor has vowed to expand a policy that allows first home buyers to borrow from a bank with a deposit of as little as 5 per cent, without needing to pay the cost of lenders’ mortgage insurance. Irvine said it was a good policy “on the margin”, but he urged that it also needed to be followed by a “significant intervention” to increase the number of homes under construction.

Irvine conceded the federal government did not control key policies that affect housing supply, but said Canberra could be “more demanding” of the states and local governments to boost the supply of homes. He backed moves to simplify planning rules, and said Canberra could increase the number of people with building skills in the migration intake.

Former NAB boss Ross McEwan declared in 2023 that housing was the biggest issue facing Australia, and Irvine reiterated his predecessor’s claim. “This is the single biggest policy issue in our country,” Irvine said.

Labor has nominated housing as a key priority, and in the final days of the election campaign it announced a plan to offer state governments more than $2 billion over four years to boost housing supply.

The focus on housing comes as investors prepare for interest rate cuts. NAB’s Auld has tipped a super-sized 0.5 percentage point rate cut from the Reserve Bank this month, followed by 0.25 percentage point cuts in July, August, November and next February.

‘The first few months of this year have witnessed pretty dramatic shifts in global economic policy. I expect unpredictability and volatility will persist for a while yet.’

NAB chief executive Andrew Irvine

NAB’s profit result was slightly ahead of market expectations, and NAB shares closed 1.6 per cent higher, at $35.87.

A major issue for NAB is growing competition in the business lending segment, which attracts higher margins than mortgage lending and is being targeted by NAB’s rivals. Irvine vowed to expand NAB’s business bank as well as defend it, and pointed to its push to attract more deposits from business clients.

“In a nutshell, everyone else wants what we have, and we’re not going to give it up without one hell of a fight,” he said.

Morgan Stanley analyst Richard Wiles said that while NAB’s profits beat analyst estimates, the bank’s result had been supported by trading businesses – which tend to be more volatile – and cuts to provisions for bad debts.

“We believe NAB delivered a sound result,” Wiles said. “There are no surprises in underlying margin, credit quality or capital trends.”

The bank’s revenue rose 1.7 per cent, helped by higher income from its markets trading businesses, while its net interest margin – funding costs compared with what it charges for loans – was flat. NAB’s charge for bad loans of $348 million was slightly lower than in the second half of last year.

Irvine said Australia’s economy was probably through the worst of a weak patch, but the sense of uncertainty caused by the Trump administration’s policies would continue for some time, and businesses appeared cautious about taking on new debt in this economic environment.

“The first few months of this year have witnessed pretty dramatic shifts in global economic policy,” Irvine said. “I expect unpredictability and volatility will persist for a while yet.”

NAB announced it would pay a fully franked interim dividend of 85¢, in line with the second half of last year.

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