NAB chief executive Andrew Irvine blasts Australia’s “national obsession” with real estate

The chief executives of Australia’s biggest banks have expressed fears about the nation’s obsession with real estate and the highest mortgage arrears rate in more than a decade.

National Australia Bank CEO Andrew Irvine, who moved to Australia from Canada in 2020, told a parliamentary inquiry on Friday that Australia’s focus on real estate instead of starting a new business was contributing to Australia’s long run of weak productivity, that ultimately feeds into high inflation.

“I came to Australia a little over six years ago and I was quite surprised by the enormous focus on housing that we have here — it’s a national obsession,” he told the House of Representatives economics committee on Friday.

“On the margin, housing is a low productivity asset class and I do actually think it is a driver of the broader issue where we might be over allocating capital to property and therefore under allocating capital to more productive uses for capital.

“You know, I think that’s a problem. It increases cost of equity because we don’t have enough Australians owning shares, we don’t have enough Australians owning businesses, and we don’t have enough Australians employing capital to what I call risk capital.”

Mr Irvine, a dual British-Canadian citizen, also slammed Labor for scrapping the 50 per cent capital gains tax discount on a range of asset classes, including shares, and replacing it with a minimum 30 per cent tax from July next year and indexation for inflation.

“I can live with the changes to negative gearing and I can live with the changes to capital gains for property,” he told independent MP Allegra Spender.

“But where I had more concern was the changes to capital gains tax outside of property asset classes.

“If Australia is going to be a more dynamic Australia, I think we need to make sure that risk assets are taxed at lower levels than passive or property assets so I would want someone to be able to come here, start a new business, build a business that’s extremely successful and pay a lower tax outcome than if they invested in property, because they’ve taken risk.”

Mortgages are also increasingly seen as risky with Commonwealth Bank chief executive Matt Comyn expecting the pain to get worse, two days after CBA revealed mortgage arrears at Australia’s biggest home lenders had risen to the highest level in 14 years, even before this month’s fifth Reserve Bank hike for 2026.

“Yes, I would expect that to increase,” he said.

“It’s relatively difficult to precisely forecast but I think it’s a reasonable proposition to expect, again contingent on the direction of rates, but one would expect that they are on hold or certainly not lower for an extended period of time.

“I expect that the arrears rate would gradually trend up over the course of at least most of calendar year 2027.”

The prediction was made two days after the Commonwealth Bank revealed, in a September quarter trading update, that 0.8 per cent of mortgages were 90 days or more behind on their repayments, with the highest arrears rate since 2012 occurring before the Reserve Bank this month raised interest rates for the fifth time this year.

That marked an 11 basis point increase since the March quarter’s 0.69 per cent level, covering the RBA’s initial two rate hikes this year.

Australia’s captains of banking are united in their call for Labor to cut spending to take the pressure off inflation, with Mr Irvine on Friday echoing a call made on Thursday by his ANZ and Westpac counterparts, Nuno Matos and Anthony Miller.

“It is undoubtedly true that that additional public sector spending in an environment where we have poor productive supply capacity is unhelpful,” Mr Irvine said.

“Public sector spending in and of itself is, I think, crowding out private sector spending and that’s, I think, problematic.”

Since Labor came to power in May 2022, Federal Government spending on public sector jobs has soared by 35.3 per cent to $43.8 billion as the number of Commonwealth public servants and agency staff has climbed by 14.7 per cent or almost 50,000 people to 389,200, Australian Bureau of Statistics data showed.

But Mr Irvine said state and territory governments, who receive Commonwealth funding from GST collections, were also to blame, under questioning from Liberal MP Simon Kennedy.

“I would point out it’s not just the Federal Government, it’s all levels of government — State spending, local councils, everything,” he said.

Mr Comyn agreed with Mr Kennedy’s suggestion that trimmed Commonwealth spending — now at a four-decade high excluding COVID — would reduce interest rates from an existing 18-year high of 4.85 per cent.

“Yes, and then the next question is where should those savings be targeted?”

He said Budget surpluses were ideal during good times but harder to achieve.

“Through the better times, you should be in surplus and repaying and keeping the debt levels down — the problem that we all confront is I think there are much more significant and more frequent shocks likely to impact the economy,” he said.

“I believe in fiscal discipline, I believe in a fiscal framework, which helps to articulate that. Australians actually expect and demand a very high level of service, I think this is part of the problem.

“Choices will need to be made — many of those choices are not easy choices, which does not mean they should or could be avoided.”