NAB CEO Ross McEwan spoke to 3AW host Neil Mitchell on Friday 27 October 2023 on topics including housing, the economy and cost-of-living. The full transcript is below. You can also listen to the broadcast via the 3AW website.
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NEIL MITCHELL (NM): We’ve been talking about cost of living, we’ve been talking about possible increase in interest rates, people cutting back spending for Christmas – and adding to that housing and immigration. Now a lot of the focus this week have been some extraordinary increases in rents, extraordinary increases continuing in the price of housing and the shortage of housing. What do we have 170 people per rental property trying to rent a residence? We’ve had landlords saying: ‘we’re getting out, it’s just not worth it to us anymore’.
This is a rare opportunity to speak to him in the studio, the Chief Executive of National Australia Bank, Ross McEwan – thanks for coming in.
ROSS MCEWAN (RM): Good morning, Neil.
NM: Good morning. Housing – is it a crisis? Is it wrong, too hard to call it a crisis?
RM: I think it is. It’s become a crisis, and it goes back to the old thing of economics of supply and demand. We’re building about 175,000 houses a year and we need to build about 125,000.
NM: Sorry, how many do we need to build?
RM: Sorry, 225,000. And that’s been going on now for probably four or five years, so you end up with a situation we’ve got – not enough houses for people to rent, and houses, when you go to buy it, it’s getting more and more expensive because there just aren’t enough of them. That’s the problem.
NM: Is it going to get any better in the near future?
RM: It doesn’t look like it, unless we intervene right now and make it easier for developers to get on and develop and get the approvals to develop much faster. That’s what I’ve been calling for. It’s making sure that we’re clear about what a developer has to do to get an approval in and get it moving. Because if it takes years to get a development, just to get the shovel in the ground, that’s going to be passed on to the buyer of that unit or that house. And that’s what’s been happening. Prices going up.
NM: If you’re going to go develop more, you’re going to have to go to the city fringe though, aren’t you?
RM: Well, I think you’ve been having the conversation this morning about ‘closer in’ and ‘going up’. I think the danger of going to the city fringe, you’ve then got to build all the schools. You’ve got to build all the infrastructure of roading, and rail and trams. Where in the centre of the close to the city, you’ve already got those infrastructural features here – so we need to make tracks of land available closer to the city.
NM: How do we do that? Golf courses?
RM: Well, that would be controversial, just like the one you’ve been talking about this morning.
NM: Caulfield racecourse, we don’t need Caulfield Racecourse. What sort of thing?
RM: There’s a lot of land, if you actually use your mind around even railway stations, above railway stations, There’s a lot of building capability above and close to the city. And when we talk about housing, I think we’ve got to be thinking about the different types of housing, because Australia is also missing out on not enough social housing for those who are really struggling, need a house. And you just need to talk to the likes of the Salvation Army or Good Shepherd, and they’ll tell you that people are really struggling to find a house, and when they do, so much of their income is going on to just renting.
Then you’ve got affordable housing. We talk about being close to the city – how would you be being a nurse or a policeman or a teacher working in the city and having to commute 20 odd kilometres to get to work every day? One, the expense. Secondly, the time. That is a major impediment to people.
NM: What hope can be offered, or advice can be offered to somebody in their early 30s, late 20s saying: ‘I want to get into the housing’ or ‘I want to own a house or property’? What’s the advice?
RM: I’m not in the game of giving advice on the radio, we’d need a specialist but I’d probably move in as soon as you can, because look, this year we’re predicting house prices will be up by 8%. We’re predicting next year they’re going up about another 5. That’s our chief economist. It is because this comes back to, there’s not enough supply and there’s a lot of demand.
NM: I was talking to Abdul Rivi this week, former Deputy Secretary of the Department of Immigration. He’s done the figures which he used to do in government and he worked for both sides and he said the net gain in the immigration in Australia this year is 500,000 people. And what do you say? Well, let’s, let’s assume they’re couples. That’s 250,000.
RM: Yeah.
NM: And we’re building 175,000 houses.
RM: And there’s our problem. Now just to be fair though, we lost something like 600,000 people out of the country through the COVID period. So we’re not-
NM: It’s catch up.
RM: Yeah, it’s catch up, but it is showing the issue that if we want to keep growing this country, which I think we do need to keep growing this country, we need housing.
NM: But nobody can tell me what the correct growth rate is. Nobody can tell me, and I don’t think anybody’s even assessing, what the correct immigration rate is. This was his point, he said it used to be about 130, maybe 150 to 170 is right.
RM: Yeah.
NM: 500 isn’t.
RM: No.
NM: But we don’t know.
RM: But that 500 is a lot of catch up and we did need to have a catch up because we couldn’t find people in small medium sized businesses to work. If you got out into the agricultural sector, they were struggling to get people out onto the farms and the orchards and the like, so we needed to catch up and get those people back in. I think we’ve pretty well getting close to that. Now we need to work through what is the right immigration level for this country.
NM: So is immigration good for the economy or not? Some say it hides the danger of recession, it artificially inflates the economy. It’s certainly puts stress on infrastructure. Is it good or not?
RM: Yeah. Look, my view is a good level of immigration is good for an economy-
NM: Well what’s the level?
RM: Well, look, think about it. We’re all getting a bit older Neil, you and I. We need somebody to be doing the work behind us when you and I decide to get out of the workforce and we need to keep replacing and making sure we’ve got people in this economy that are going to be working, paying their taxes. Otherwise I think we’ve got a problem as we age.
NM: Fred. Go ahead, please, Fred.
Caller [Fred]: Good morning. Good morning, Neil and guest. Look, my three points are firstly, correct me if I’m wrong. But back in the 70s we had a treasurer, John Howard, who for first home buyers allowed their interest rate on their home loan to be tax deductible for a short period of time and that worked well because once you move from your first home to your second home, you lost that benefit. So it wasn’t a long term thing. Secondly, as interest rates went up to 7.5% what you found was that the government capped existing home loans to 13.5% for existing borrowers and the new borrowers had to pay the higher rates. I can’t see why the government can’t persist first home buyers to get into the market to give them some hope.
NM: So you would cap the interest rate at a particular level of first home buyers. I don’t remember that period of having tax deductibility on the gap on your interest. I don’t remember that for a private home. For an investment property, yes. I don’t remember a private home, do you?
RM: No. But I also remember paying 18% for my first home loan and 24% for the second loan. But inflation was 14-15%. So there’s the killer at the moment, we’ve got to get inflation down. But can I just say, I’m always reluctant to manipulate a market because you either pull forward demand or push it out when you put all these incentives and changes in. I think we get back to the problem we have. We just do not have enough homes to be built. So let’s get to that point of how do we actually build some more homes, get the planning approval standardised across all the states and structured in a way that, good developments, not rubbish developments, good developers can get on and do the job they want to do.
NM: You mentioned inflation, Cup Day, the Reserve Bank announcement. Are you expecting an increase in interest rates?
RM: Well, we have been saying that there’s one more increase coming, Neil, at some point in time. I’m not too sure whether it’s Cup Day. That’s strange that Cup Day has become the big special day. But just be careful. You might end up with a Christmas one if we’re not careful. Look, I think we think there’s one more left and we’ve been calling that for the last probably four or five months.
NM: Point two five?
