National Australia Bank (NAB) CEO Ross McEwan has called for urgent action to accelerate the housing supply in order to mitigate the rising migration and upward pressure on house prices and rents. Speaking to parliament’s House of Representatives economics committee, McEwan highlighted the chronic undersupply of housing stock, which he said would clash with the nation’s rising population. He stressed the need for more land to be made available for the construction of houses quickly and emphasized that fast-tracking planning permissions and development would be the most effective way to reduce stress on the housing market.
McEwan also criticized local councils for rejecting development projects, referring to them as “NIMBY” (Not In My Back Yard) councils. He argued that construction should be concentrated in major cities with existing infrastructure, taking into account transport hubs. He emphasized that all sectors of housing, including affordable, social, and general housing, need to be addressed to cater to the population growth that is expected to continue.
In response to questions from the committee, McEwan stated that NAB was pleasantly surprised by how customers had weathered the rapidly rising interest rates. While home loan arrears were starting to increase, they remained below the 10-year average. McEwan also noted that first-home buyers were holding up well, despite being at greater risk of stress due to borrowing at the top end of their range and having lower incomes.
NAB’s personal banking boss, Rachel Slade, highlighted the competitive nature of the home lending environment and stated that the bank regularly hears from customers looking for better deals on their home loans.
McEwan’s appearance before the committee followed ANZ CEO Shayne Elliott and his team. Both CEOs shared a similar perspective on the economy, noting that households have been resilient to inflation and rising interest rates so far. However, they expect home loan arrears to increase as pressures continue throughout the year.
ANZ chief risk officer Kevin Corbally cautioned against being too optimistic about the situation, highlighting the modest increase in customers reaching out for help as household budgets are squeezed by high inflation and higher mortgage repayments. ANZ has provisioned around $4 billion to cover potential future credit losses, as the situation could deteriorate with the expected interest rate rises in August and September.
The Reserve Bank of Australia held the cash rate at 4.1% in July, but two more rate rises would bring the official cash rate to around 4.6%. This would result in most bank home loan rates being between 6% and 7%. Elliott stated that further rate hikes may be necessary depending on the global economic environment and inflation levels. However, ANZ expects the official cash rate to settle in the range of 3% to 4% in the long term.
McEwan’s plea for urgent action to accelerate housing supply highlights the need to address the chronic undersupply of housing stock in Australia. The rising migration and population growth, coupled with the already pressured housing system, are putting upward pressure on house prices and rents. Fast-tracking planning permissions and development, along with a coordinated effort from state and territory governments, is crucial to lift supply and meet the housing demands of the growing population.