SYDNEY: National Australia Bank (NAB) chief executive Andrew Irvine says Australia needs to speed up its decision making to drive economic growth and fast-track increasing housing supply, which is the country’s “biggest societal and policy challenge”.
NAB, Australia’s third-largest bank by market capitalisation, yesterday reported a A$7.09bil or about US$4.61bil cash profit for its financial year ended Sept 30, compared with A$7.10bil last year and a Visible Alpha consensus estimate of A$7.17bil.
NAB and the rest of Australia’s “Big Four” banks hold huge mortgage books and therefore rely heavily on the strength of the housing market. Australian home prices jumped by the most in more than two years in October as rate cuts and government policies fuelled buyer demand.
The Reserve Bank of Australia (RBA) kept the official cash rate on hold this week at 3.6% and economists now don’t expect a rate cut until May next year.
“Housing in Australia’s biggest societal and policy challenge,” Irvine told a call with reporters.
“The economy is growing and it’s frankly growing at about full capacity without being able to generate too much inflation.
“You’re seeing house prices increasing and the RBA felt there was not a need to provide further stimulus to the economy because we’re seeing inflation proving to be persistent and sticky.”
Australia is falling far short of its goal of building 1.2 million homes by 2029.
The supply of new housing is near its lowest in a decade, the National Housing Supply and Affordability Council said in a report this year, despite moves by some state governments to clear the way for more higher-density development around transport hubs and commercial centres.
“What we need to do now is really drive productivity, more reliable energy, more dwellings, fewer rules, quicker decisions of what this country needs to grow faster without generating inflation,” Irvine said.
Building approvals rose 15.3% in September, according to official data, but worker shortages and high costs are expected to keep supply constrained in the near future.
NAB’s credit impairment charge climbed 14.4%, primarily due to higher individually assessed charges within its business lending portfolio.
Operating expenses for the year rose 4.6% to A$9.85bil, mainly due to higher personnel and technology-related costs.
The rise includes A$130mil related to payroll review and remediation charges after the lender discovered it had underpaid some of its staff.
Offsetting the impact of higher expenses and charges, NAB’s Australian business lending balances rose 9% and deposit balances for the year grew 7%.
Business banking is NAB’s largest division but increased competition from Commonwealth Bank and Westpac in the past year has threatened the bank’s market share and margins.
NAB’s business and private-banking division, which makes up almost half of its profit, reported a 1.6% rise in cash earnings to A$3.33bil for the year.
Net interest margin, the spread between interest earned from loans and paid to depositors, rose three basis points to 1.74%. — Reuters
