State governments making the housing crisis worse: NAB boss

The outgoing chief of one of Australia’s big four banks has taken a shot at state governments, saying some of their actions are making the country’s housing crisis worse.

Ross McEwan, who’s stepping down as the head of the National Australia Bank (NAB), has highlighted slow development approvals for holding back large projects and criticised state governments’ huge tax take on new housing, saying it’s a massive disincentive to developers.

Mr McEwan, who helped rebuild NAB’s battered reputation in the wake of the Banking Royal Commission, is leaving the top job after nearly 5 years - handing over the reins to the current head of NAB’s Business Banking arm, Andrew Irvine.

In a farewell interview with the ABC’s Patricia Karvelas, Mr McEwan spoke about the housing crisis, interest rates, and the economic outlook.

Gouging state governments

Ross McEwan says there’s no doubt Australia is facing a housing crisis, which is being exacerbated by not enough homes being built each year for a growing population.

“It is a crisis,” he says, “there’s 50,000 homes or apartments not being built that we need built every year for the next probably five years to catch up.”

When asked how that building shortfall can be fixed, he’s very clear where the blame lies.

First, he says he’s told state governments they need to be much faster in approving major developments.

“The second thing is the number of big developers (that) have come to me and said ‘Ross, have a look at the tax on getting an apartment up!’”

Mr McEwan cited his home state of Victoria as an example:

“If you’re going to put up an apartment that’s worth $1 million, about 38% of that goes in state and other taxes.”

“So you’re not getting a $1 million apartment, you’re getting $1 million minus the tax.”

“You’re getting about a $600,000 apartment for the $1 million and that needs to be addressed as well if we want developers building the numbers,” he said.

“But we’ve got to get these houses going.”

Mr McEwan also took another indirect dig at state governments, saying many of the big infrastructure projects they are currently undertaking are sucking up vital construction materials and workers.

“There is a little bit of crowding-out going on too, with all the infrastructure being built,” he says.

“There’s only so many workers to do the jobs, there’s only so much concrete.”

Interest rate cuts

With many Australians with a mortgage doing it tough, NAB is more cautious than some of its other competitors like the Commonwealth Bank of Australia (CBA) on the timing of interest rate cuts.

The CBA is predicting three cuts to the cash rate this year alone, while NAB says there will only be one 0.25% cut by December.

“We’re still not predicting interest rates coming down until the final quarter of this calendar year,” Ross McEwan says.

“So you get tax cuts coming through in July, which will be helpful, and then interest rates starting to drop off in the latter part of this year and not before.”

Mr McEwan says inflation is still too high for the RBA to begin cutting rates in earnest.

“Inflation has to be crushed.”

“This year, we think inflation will have a three in front of it by the time we get to the end of this year and next year we’ll be back into twos by the time we get to the end,” he says.

House prices

NAB recently revised its housing forecasts for this year, with some big changes.

In its latest quarterly NAB Residential Property Outlook - released at the start of February - the bank revised down its expectations for home price growth in Sydney this year, from 5% to 4.7%.

Even more dramatic was the slashing of its forecast for Melbourne property prices - from 5.5% growth in 2024 to just 2.6%.

On the other hand, the bank has a more rosy outlook about Brisbane, Adelaide, and Perth. 

It’s now expecting 7.7% price growth in Brisbane this year (up from 6.5%), 6.4% growth in Adelaide (up from 6.2%) and a very impressive 9.9% in Perth (up from the previous forecast of 6.2%).

Nevertheless, all those forecasts predict home price growth in Australia’s capital cities - with the exception of Hobart - will be slower than last year.

The bank puts a lot of that down to a slowing economy.

“We still see this economy growing, but it’s slowing down and it’s feeling like it’s really, you know, slowed down,” Ross McEwan says.

“I think we’re still going to see growth.”

“I’ve been very optimistic we won’t see a recession, but we’re going to see two-quarters of very low growth before it starts moving again,” he says.