NAB CEO Speech: Economy, Housing & Net Zero

The following speech was delivered by NAB CEO Ross McEwan at the Australia Israel Chamber of Commerce event in Melbourne on 24 August.

** CHECK AGAINST DELIVERY **

As I thought about today’s meeting, there are many issues that we all face in our personal and business lives. But I want to focus on two in particular, where with the right focus, we can make a real difference. The first is the housing supply problem and the second is the transition to net zero.

Let’s start with some thoughts on the status of The Australian EconomyIt can be a good environment.

Inflation, while falling, has hit Australians for three decades in the last 18 months.

There is a lot of debate about whether Australia will go into recession because we have so many headwinds. My opinion is not.

But things are tough and will feel tough at times because of the tough but necessary measures taken to curb inflation.

I say that the alternative to rampant inflation is difficult but necessary because it is bad. I can remember when my first mortgage interest rate was 18% and my wife and I had a second mortgage at 24%, but inflation was 14 to 15%.

Others in the room must have had similar experiences. We don’t want to go back to that.

NAB data shows the cost of living is already stressing Australians by a large margin.

It’s hard to find a piece that isn’t spent. Groceries, gasoline, mortgage, rent, electricity, gas, food, travel, transportation – you name it, everything we buy as consumers is expensive.

This led to a massive behavioral response. Our clients are more engaged with their finances than ever before, and many individual clients are budgeting for the first time.

They want to be good with their money and take responsibility.

Customers make adjustments to their spending, saving an average of $300 per month as they cut back on dining out and car trips to save on fuel.

A story that hits close to home at NAB – we see long lines at the coffee machines in our offices as our colleagues take $5 for free office brew. A year ago no one was using these machines! But I’m glad they want to come back to the office, so no complaints.

NAB offers to check in with customers, and so far, it’s mostly been a 'thanks, we’re fixing it’ message.

We are in touch with more than half a million customers and have contacted around 8,000 home loan customers whom we have deemed to be at high risk. Only 14 people required immediate assistance.

This contrasts with some unhelpful focus on catchphrases such as 'mortgage cliff’ or 'mortgage prisoners’.

The reality is that the number of mortgages we have, which only happens after a long period of working with the client, is below the 10-year average, not just pre-pandemic levels.

Not suggesting that some customers aren’t affected. They and we are here to help.

My message to anyone finding the hard stuff is 'please call your bank’. If customers facing difficulty contact our NAB Help Desk early, 90% of them are back on their feet within 90 days.

So overall, the economy may be weaker than last year, but it’s still in good shape.

There are plenty of reasons to believe that things will turn more favorable later next year.

Unemployment is at its lowest level in decades. Our natural resources are a great export opportunity. As I speak to small business owners across the country, I keep hearing stories of ambition to grow. The biggest concern is the ability to find labour.

And with a sharp rate hike cycle, the housing market has also fared better than expected.

Perhaps little surprise given this scarcity Home comfort.

We are not building enough homes to keep up with the growing population, and over time that will further drive up house prices.

Acute housing shortages have a particularly significant impact on young Australians and will affect future generations if systems are not addressed now.

Because owning an inviting space creates opportunities and leads to better economic outcomes.

I recently met with a client on the Sunshine Coast whose development was delayed by 20 years because of issues with land parcel certification. In WA, one developer told me they were still chasing approvals a decade after they were first put forward.

These are not isolated cases.

Many organizations must navigate multiple processes across jurisdictions. Underwriting a home loan may require different processes depending on which state the buyer lives in.

A coordinated response from federal, state and territory governments is required to enable faster, more consistent and simpler planning and approvals. It relates to both land development and residential construction.

I welcome the results of last week’s National Cabinet meeting, particularly the proposal to regulate approvals, planning and zoning.

The government alone does not have to solve this. Banks, developers and community partners can move faster.

This urgency is also needed to address Australia’s growing social and affordable housing crisis. 120,000 Australians experience homelessness every night. As I said before, we need to find ways to fix this.

Good progress was also made on this front in the National Cabinet.

NAB wants to play its part and lend an additional $6 billion to affordable and specialty housing by 2029.

We work closely with community partners such as Good Shepherd and the Salvation Army and support a number of social and sustainable housing projects, including the Nightingale Project in Melbourne.

Now to my second topic: Answering Climate change.

Also true is the need for an urgent integrated and sustainable approach to transition to a net zero economy.

Today, we released a new report that shows harnessing Australia’s natural advantages in solar, wind and critical minerals could add up to $435 billion to the national economy by 2050.

But what matters most is how we change.

First, we must build, build, build. Implementation of renewable projects requires investment and labor, shorter lead times, as well as a sustainable national framework that provides major green infrastructure projects with widespread community support.

Australia can reap the benefits of innovation and productivity growth, which will boost Australia’s supply chain competitiveness and put the country in a stronger position as our traditional high-emitting exports are replaced by new green exports.

Looking at it through opportunity, it’s exciting. Big changes are coming in agriculture, construction, manufacturing, service sector or energy.

While this change is problematic, it is everyone’s job to take action on climate change.

The passive cost is also too high to ignore. Frequent natural disasters are a stark reminder.

At NAB, we recognize our role. We have long been a leader in renewable financing in Australia. Three-quarters of our power generation funding is already directed towards renewables.

We are working with our customers on planning for the transition. We all know what is needed and our job is to support our clients in getting there, not tell our clients what to do.

These are two topics that are close to our minds as a bank because they are paramount to the communities in which we operate.

I look forward to speaking with Leon and taking your questions.

Thanks.