Housing crisis will take a generation to fix, says NAB chief economist

Slumping property prices offer no silver bullet for solving Australia’s housing affordability crisis, a federal parliamentary committee has been told.

NAB chief economist Sally Auld says the problems causing the deadlock have been brewing for years and will take a “generation” to fix.

She told the Senate select committee on intergenerational housing inequity on Thursday supply was the main root of the crisis, but other factors were now having an impact.

“House prices have risen much faster than incomes since around the turn of the century, driven by factors including lower interest rates, taxation settings and strong demand,” Auld said.

"Housing affordability is one of Australia's most significant economic and social challenges."

Rates of property ownership by Australians aged under 40 have plunged to their lowest level since the 1950s.

Auld said a shortage of affordable housing was now being worsened by government tax changes, the impact of the Iran war, higher interest rates, and ballooning construction costs.

A prolonged surge in housing supply was required to make housing more affordable and that would take at least 20 years.

“It’s likely to take the better part of a generation to resolve. It’s not an issue that we’re going to solve overnight,” she said.

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MPs were also told by the other chief economists from the ANZ, Westpac and Commonwealth banks that building more housing was the bedrock of solving the affordability crisis.

The ANZ’s Adam Boyton said issues impacting the housing market, such as state planning laws and tax rates, had been piling up for decades.

“The fundamental challenge is ensuring Australia can supply more housing at a scale and a pace that meets the needs of a growing and diverse population.”

Interest rate hikes and bank rate shifts

The shifting economic landscape has prompted three of Australia's big four banks to alter their official cash rate projections, with most now pencilling in another rate hike before the year ends.

CBA and ANZ have both predicted a 0.25 percentage point rate hike in November 2026, which would take CBA's forecast cash rate to 4.60 per cent. 

NAB is forecasting a 0.25 percentage point hike as early as September 2026, suggesting a second increase may be needed in November. 

Westpac stands alone among the major banks, holding off on near-term hikes and forecasting its next move will be a 0.25 percentage point cut in August 2027.