Earlier today (Tuesday 20 April 2021), NAB CEO Ross McEwan joined 2GB Mornings host, Ben Fordham, to discuss topics including the housing market, the current benefits for first home buyers, businesses confidence and bank branches.
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Ben Fordham (BF): Speaking of warming up, Sydney’s housing market, well, it’s warm, it’s hot, it’s boiling hot. Some would say it’s out of control. All the big four banks are predicting massive growth over the next few years. I mean, the RBA even context growth of 25 per cent between now and 2023. So that means in theory a property worth a million dollars today could be $1.25 million in two years. Now, I just want to give you this example. And I sometimes real estate agents can underquote when it comes to setting a reserve price but not by this much, surely. I mean, it’s an apartment in Darlinghurst that sold recently. The reserve price, 1.8 million. It sold for 2.7 million, almost a million dollars above the reserve. It wasn’t a five-bedroom mansion either; it was a two-bedder. Ross McEwan, he’s the Chief Executive of the National Australia Bank, and he joins me live in the studio. Ross McEwan, good morning to you.
Ross McEwan (RM): Good morning, Ben.
BF: You’re based in Melbourne these days.
RM: Based in Melbourne.
BF: Is it the same in Melbourne as what we’re seeing in Sydney?
RM: It’s the same. And when you get 15 to 20 people turning up in an auction all read to go, those sort of things are happening. And it’s certainly happening right across the country, not just in Sydney.
BF: Are you saying that it’s not necessarily in the CBD and the 10k-radius outside the CBD, its people wanting further out?
RM: Correct. As COVID has shown, a lot of people can work from home for part of their week, and we’re seeing a big trend to moving out of the city, and house prices out of the main centres are going up much, much higher than those, the increase on those in the inner city at the moment.
BF: The rule used to be that if you can buy anything within 10ks of the CBD you’re laughing, you’re guaranteed a certain growth. At least we’re spreading the love out a little bit.
RM: Well, it’s certainly spreading the love when you can get sort of an hour out of the city and those prices are moving considerably higher than even the prices in the city. So, it’s across the board. And it’s right across Australia.
BF: So, what is going to be done about these house prices? Do we just let them go and all those people who own the properties celebrate, meanwhile, the first homebuyers, the people who want a crack into the market miss out?
RM: Well, an interesting thing about first homebuyers – there are more first homebuyers getting into this market than we’ve seen probably for the last five to 10 years. On our book alone about 16 per cent of new lending is being – is going to first homebuyers. Traditionally that was about half that amount. So first homebuyers with low interest rates are finding it cheaper to actually buy as long as they’ve got a deposit – and the government’s been very helpful there – it’s cheaper to buy than it is to rent, because interest rates are so low.
BF: So, you’re saying first homebuyers aren’t missing out?
RM: No, we’re seeing 16 per cent of our new lending is going to first homebuyers. That is higher than we have seen probably for a decade. So, they’re certainly taking the advantage of low interest rates, fixing them in, and it’s cheaper for some of them than renting.
BF: You’re listen to Ross McEwan, the Chief Executive of the National Australia Bank. Ross, I can see that your chairman has said a curb in mortgage lending could take the heat out of the market. So, does that mean you’re about to tighten the strings a little bit?
RM: Well, we’ve been making sure that we haven’t been loosening out on the strings of how do you get a home loan. And I think what my Chairman is saying is that if this keeps going, he may see the RBA actually stepping into the marketplace and curbing certain parts of it. You’re seeing this happening in New Zealand at the moment. I’m not saying it’s going to happen, but there is a chance that if they see that –
BF: Well, when you say “curbing”, just explain what that means. You’re not talking about changing the rate?
RM: No, they may make it a little bit more difficult for, for example, investor owners, so for their second, third or fourth property as opposed to the owner operator or occupier. And those are some of the changes you’ve seen in New Zealand. But it’s not expected at the moment, but the Reserve Bank can step in and the regulators can step in as well and curb things.
BF: What are you seeing happening on rates?
RM: Look, I think rates are going to stay low for the next two to three years. The Reserve Bank is pretty determined to keep them low for 2022-23, and I think that’s going to be the case.
BF: What’s the mood out there as far as business is concerned at the moment, because they’ve had a 12 months from hell, hit with a sledgehammer that was coronavirus, they’ve all been banking on this vaccine rolling out well to get everyone back on track, but that hasn’t worked in the way it was intended.
RM: Look, our surveys are showing that businesses are feeling more confident than they have for a long, long period of time, which then leads into they’re going to invest in their businesses because they’re confident. We’re starting to see that coming through in our small, medium-size business book. They’re confident and they are getting back into business and getting on. There are some, of course, that have been hit hard and will struggle to recover and, you know, therefore, we’re going to have to nurse some of them through. And the government, again, has been very helpful with the SME lending scheme that they’ve put in place to bridge them through for probably the next five to 10 years if they think it’s good business.
BF: Okay. Speaking of businesses closing, bank branches closing. I’m sure that’s not one you necessarily want to talk about. But this is a big deal because we’ve had nearly 100 of the big four bank branches close across New South Wales since the beginning of last year. That’s a hundred just in the state of New South Wales, just since the start of last year. NAB has closed or has plans to close 45 bank branches nationally since the start of last year. Now whenever we mention this you get feedback from people saying – and I’m one of them; I’m 44, I don’t consider myself old – but on major transactions I prefer to go into the branch and have a conversation face to face.
RM: Well, look, before we close a branch or go anywhere near closing a branch you look at all the stats of where are people banking, whether it’s in that branch or other branches as well, what other services are available. I mean, I run 2,000 bankers who are out all day every day talking to customers not located in a branch. We’re leaving people behind a sense of having people stay in the communities with local bankers. So, a lot of things. But people are doing more and more of their transaction online. Ninety-three per cent of all money payments are electronic payments.
BF: So eventually will we not have bank branches?
RM: No, I think they’ve changed their purpose. For example, what you’re talking about is people come in for big purchases where they need advice or service. That’s what a bank branch will be there for. And we’re seeing more and more – even today, COVID meant that now 25 per cent of all our mortgages that would have been done at a branch have been done on a Zoom screen. In 12 months, customers feel very comfortable having that conversation. So, I think we’re seeing change, but we’re seeing change for a long time. I can remember pouring petrol into service stations when I was getting myself through university. You used to go out and pump the tyres up, check the oil, wipe the windscreen, whatever. You go to a service station now; you don’t get any of that.
BF: I’d love that. Somebody should bring that back, in fact. And there are some service stations have brought it back. So that’s the thing – the more banks that close branches there will be others who’ll come along and say, “We will provide that service”.
RM: And certainly, NAB will be providing that service. We’ve got a big branch network, and particularly out in country areas.
BF: I know you’re a Kiwi. Are you going to take advantage of the travel bubble?
RM: Certainly, going to be taking that travel bubble opportunity given I haven’t been back to New Zealand for about 14 months. It will be great to see some of the family and friends.
BF: All right, well, we appreciate your dropping into the studio in Sydney. Thanks so much.
RM: Thanks, Ben.
BF: Ross McEwan, the Chief Executive of the National Australia Bank.
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