By james art Australians are “dissatisfied” with the state of the economy but are “doing well” but “need to work hard” amid persistent living costs and financial pressures, one of the nation’s biggest banking bosses says.
National Australia Bank chief Andrew Irvine also warned of major economic and societal consequences for Australia if the housing crisis is not addressed, warning that the types of homes being built are not allowing enough young people to enter the housing market.
He also marked a major overhaul of the way NAB does business, saying he was not content to be “just one of the big four”. He wants customers to love the bank as much as they love Toyota and Bunnings and plans to explore how customer loyalty is rewarded.
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Mr Irvine believes there are some signs that the perceived pressure on household budgets should ease next year.
“We are doing well. We’re bumping but we’re grunting,” Mr Irvine told The Nightly in a wide-ranging interview. “And we’re not really having fun, but we’re getting by. We’re making ends meet.”
He said there were inconsistencies: for example, resource-rich WA and Queensland were doing better than the rest of the country, adding that for older people who had paid off their home loans, “life is good”.
“But that’s the crucial point – everybody has a job,” Mr Irvine said.
“Everyone who wants a job has one. If you want a second shift or a second job, you can find one. People generally get by, but they have to work hard and budget hard.”
Mr Irvine pointed out that there were some positive signs – inflation is slowing and interest rates are likely to start falling early next year despite stronger-than-expected jobs numbers earlier this month.
“I think we’re at the toughest point in the economic cycle,” he said.
“There is light at the end of the tunnel … in (20)25 and then certainly in (20)26 things will improve.”
Mr Irvine credited the Reserve Bank of Australia, which is battling the highest inflation in three decades with rate hikes between mid-2022 and late 2023, for handling the situation well
“We’ll see how it goes, but people don’t remember — there have been other downturns where the unemployment (rate) was in double digits and interest rates were 17-18 percent.” So it’s much better than those examples,” he said.
Too few first-home buyers have been able to break into the market in part because of the wrong mix of homes being built – and not enough houses, he said.
“We need more deals,” he said. “Last year we brought in 700,000 new Australians and only 10,000 of them had a deal.
“It’s the wrong combination. We need more tradespeople… coming to Australia to help build homes, we need to make planning quicker and simpler.”
“You can’t talk to a builder who isn’t pulling their hair out about how difficult it is, the details, that it’s over-regulated. It’s too hard. In some countries, taxation is a problem. . . it’s certainly a problem in my state (Victoria).”
Mr Irvine stressed that more action was needed on housing supply than on those that would contribute to demand, such as changes to incentives or help for would-be first-time buyers, as further demand would simply fuel further price growth.
He said too many of the homes available for sale were large homes that were too expensive and unsuitable especially for first-time buyers.
“We need to really push for what I would call medium-density housing — townhouses, low-rises,” he said. “They’re more affordable, they get off the ground quicker and that’s what we need in Australia right now to have more housing options for young people.”
“That’s the job. You have to buy your first house before you can buy your second, maybe third.
Governments at all levels are struggling with ambitious policy targets to meet growing housing needs, but a lack of skilled tradespeople and an often-criticised patchwork of planning laws which critics say are unnecessarily constraining new construction.
Mr Irvine added that he was not trying to dampen people’s drive to work hard and “maybe … get two or three homes in their working lives”, but more people should be able to get on the ladder of housing construction.
“I don’t think we have enough of that,” he said, pointing to European cities where the predominant or only options are three- to six-story buildings, compared with Australia’s predilection for a detached house with a garden or backyard.
He was aware of the potential cost to Australia if the housing crisis was not properly addressed.
“The lack of housing is actually forcing us to do things that are not good for the country – in terms of limiting migration and that affects the education sector,” Mr Irvine said, referring to federal government cuts to skilled migration and restrictions for international students.
“It’s going to affect manufacturing, it’s going to affect agriculture, it’s going to affect mining and mining. And all this is because we don’t have enough accommodation to house these people,” he said.
“So we have to solve this housing problem or it’s going to have a material impact on the rest of the economy.”
The NAB, in a proposal to a parliamentary inquiry into home ownership, suggested lenders could ignore HECS-Help debt in mortgage applications to allow more people to succeed, given the debts are meant to be paid off.
Although increasing the leverage of first home buyers – such as through government incentives – would be “potentially good”, Mr Irvine warned that if this was the only measure, houses would become more expensive.
Mr Irvine – now six months into the job as chief executive – was speaking as he unveiled a new strategy for the bank and said he was not happy with NAB simply being one of the country’s “big four” banks. Instead, he plans to increase personal relationships with customers, with the new strategy prioritizing “back to basics.”
He insisted that banks can be “great” and inspire customer loyalty and affection on the same level as hardware giant Bunnings.
“I think over the last four years we’ve really improved the bank,” Mr Irvine said. “But if I’m being brutally honest. . . I don’t think we’ve differentiated ourselves enough from other banks yet.
“Australians, colloquially, lump all the banks into one big four and that’s not what I want for us. I want to have a distinctive relationship with our customers – where we’re not just one of the big four, we’re their bank and we’re on their side.”
Mr Irvine in April succeeded Ross McEwan as chief executive of NAB. A Briton who has spent much of his career in Canada, he joined NAB about four-and-a-half years ago as head of its business bank – its core. He wants to bring some of the special sauce of business banking—personal relationships—to the rest of the organization.
“What I’m trying to do in the refresh is put the customer at the center of everything we do as a company,” he said.
“I think about my job because we’re in the business of helping people achieve their dreams.”
A dream come true, Mr Irvine hopes, the customer will stick with NAB for the next few and spread the word about their great experience with the bank. He believes that the perception that loyalty is not rewarded has persisted for too long.
“I want to change that too,” he said.
“I mean, we’re in it for the long haul with you, and actually (that) loyalty and length of relationship is important.
“It’s going to take a lot of work to be known as a place where … someone is in the family and says, ‘I’m having trouble with my bank.’ I want the NAB customer in the family to say “you must come to NAB; they are great’.
“I’m really all in on this and it’s going to mean we’re going to have to look at who we hire, how we hire, who we train, how we train because we’re a big company and we’re going to have to look at every element of our business to improve it .”
He admits getting Australians to recognize his bank as “great” is a long-term goal, but counters “banks in other markets have that”.
“Toyota is loved in Australia. Bunnings is often a brand that calls itself – Disney, it’s Apple,” Mr Irvine said.
“Some of them are global brands, but I’m aiming for us to be in that type of company, not in another bank’s company. We have to earn it.”
Bunnings has been named Australia’s most trusted brand twice this year by Roy Morgan, while in NAB’s own category Bendigo Bank is a three-time winner of the Most Trusted Bank award.
Confidence in banks has been low for years and the state of the industry has collapsed in the wake of revelations by the Royal Commission into misconduct in the sector, which took two years from the first evidence to the final report. Since then, while goodwill was built on treating customers during the pandemic, banks have kept it under wraps by closing branches.
As a sector, banks’ demands on counter-customers are changing – more people are using digital services and apps than physically using cash. Mr Irvine acknowledged that NAB and others had closed branches, but said: “You won’t see me closing branches that are being used.”
“So the only times we really close branches is when they are empty. You know, I feel pretty strongly that where we interact and have good customer interactions, those locations will stay open,” he said.
NAB had a 14.4 per cent share of the country’s home lending market in August, and although it is known primarily as a business bank, Mr Irvine is keen to increase its stake in mortgages. But he noted that it has been a challenge for NAB to make money from home lending over the past year.
“That’s something we’re working on – around how we can better deliver services to Australians that they value, while doing so at a fair return for ourselves,” he said.