Westpac: CEO Anthony Miller says talk of catastrophic Australian housing market hit is overplayed

Westpac boss Anthony Miller is confident Australia’s property market will withstand interest rate hikes and a tax shake-up but says the country must build more homes to improve affordability.

The $100 billion bank reported mortgage applications had dropped 20 per cent thanks to cooling demand, worse than its Big Four rivals. NAB and Commonwealth Bank each recorded 15 per cent falls while ANZ inked a 12 per cent drop.

The Reserve Bank’s three interest rate rises, changes to capital gains tax concessions and negative gearing, and economic uncertainty from the Iran war have all been tipped as key factors.

ANZ forecast a 7 per cent fall in the median house price through 2026 and 2027.

Mr Miller told an audience in Perth on Tuesday that there would be a modest pull back.

“The idea that there’s this large, catastrophic, collapse or drop in the housing market is overplayed,” he said at the Trans-Tasman Business Circle breakfast event.

“With three interest rate rises and cost of living pressures . . . there is some slow down in housing activity.

“It feels only almost responsible that people have pulled back for a period of time. It is appropriate to have it slow down.

“We certainly think it won’t be in anything like what has been forecast, which is this serious collapse.”

The value of homes across the country has rocketed more than 50 per cent over the past five years thanks partly to loose RBA policy and Federal Government stimulus being pumped into the economy.

Sydney’s median house price was reportedly more than $1.7 million in the June quarter. That was down 3 per cent.

Mr Miller said that the “whole intent” of tax was to slow investment into existing housing stock. But the bigger contributor to housing affordability will be to build more homes at the right price point, he said.

“We’ve got to go after the supply side in a much more deliberate, targeted fashion,” Mr Miller said.

“But that is an enormous challenge, and it’s one that I don’t think is answered by complaining to government.

“In many cases up, to 25 to 30 per cent of the cost of the house or the rent is basically government charges. Infrastructure charges, sewerage, water roads, they have to be paid for. But should we lump that on the person who’s buying that property for the first time?”

AUKUS advocate

Australia’s AUKUS defence pact with the US and UK will be a big target for Westpac’s business bankers, especially in WA.

The AUKUS deal will eventually underpin Australia hosting its own nuclear-powered submarine fleet, which would make the country one of just seven nations globally using the technology.

Mr Miller said building, operating and servicing a nuclear submarine was the “apex of industrial economic might”.

“It is an incredible engineering challenge, and we have an opportunity to participate in that. It’s quite extraordinary,” he said.

“We should be very excited about the defence ecosystem that follows from the commitment to have nuclear submarines. All of the personnel, all of the experts who are needed literally to help service the submarine, let alone build it, is quite extraordinary.”

The Australian Submarine Agency forecasts about 20,000 jobs will be created by the submarine program over the next three decades.

Those roles will be centred on Adelaide, with the Osborne shipyard designated the construction hub once work moves Down Under, and Perth, with Henderson picked for maintenance.

Mission critical

Mr Miller hit back at claims by junior mining companies that commercial banks were not funding their ambitions in rare earths and critical minerals.

There has been a big push for government support of the sector through Export Finance Australia, the Critical Minerals Strategic Reserve and production tax credits badged as Future Made in Australia.

Taxpayer-funded bodies including the Northern Australian Infrastructure Facility have also been pumping cash into the sector.

The banking boss said Westpac was willing to lend into the sector but government support would not rescue projects that failed to stack up commercially.

“We have appetite. We’re funding critical minerals rare earth projects, but of course it has to be feasible,” he said.

Miners have long-argued it was tough to secure bank funding due to volatile prices and the risks of building new processing capacity in markets dominated by China.

Mr Miller said that equation was changing.

“You’ve got United States government, the Australian government, other Western governments looking to commit and underwrite critical minerals and rare earth projects,” he said.

“The uncertainty we previously attached to particular projects has been removed.”

Mr Miller said locking in customers was just as important.

“The offtake will be there,” he said, arguing projects were now far more financeable than five years ago.

It comes as governments and miners are trying to get a new generation of rare earths and battery minerals projects off the ground, particularly in WA. “We love Western Australia, the sense of ‘let’s get things done’,” Mr Miller said. “The resilience over here is fantastic.”

AI optimist

Fears artificial intelligence will cost large numbers of banking jobs were also played down by Mr Miller after the lender’s workforce shrank by about 400 people last year.

There has been hot debate as to whether the emerging technology will lead to job losses. Qantas earlier this month pledged to shift 1000 jobs to India while pledging to speed up use of AI.

Mr Miller conceded AI would make some jobs redundant but said predictions of widespread losses were overblown.

“There will be roles that change. There will be jobs that are no longer as needed as they are today, and some of that will be because of the use of AI,” Mr Miller said.

“Last year at Westpac, 5600 people left, and 5200 people joined because the roles we needed — the skills we needed — were evolving as the bank was evolving.”

Asked whether AI could lead Westpac to freeze hiring or cut jobs further, Mr Miller said the debate had become too fixated on job losses.

“I don’t think that what has been forecast is likely, and certainly it’s hard to see where it’s come from as we sit here today,” he said.

Mr Miller called AI “the biggest opportunity of all time” for Australia because of its potential to lift productivity.

At Westpac, he said AI could help existing staff handle spikes in workload without bringing in as many contractors.

The bank has already been cutting branch jobs, axing about 200 bank teller roles last September as more customers move online.

Westpac had closed 167 branches in 2023, the biggest pullback among the major banks, before promising no further regional closures until 2027.

Mr Miller said 96 to 97 per cent of customer interactions were now digital, making some lightly used country branches increasingly hard to justify.

“It’s incredibly difficult to make a branch work where only two people a day walk into the branch in that country town,” he said.

But he said Westpac would not retreat further from regional banking: “We’re absolutely committed as a bank not to pull back from where we are with our regional presence.”