Australia's biggest banks have been grilled over record profits at a parliamentary inquiry, with evidence emerging that falling house prices have done nothing to improve housing affordability, and that construction lending has slumped sharply as the market braces for further price declines stretching to 2028.
Housing Affordability Has Worsened Despite Price Drops
The inquiry heard that homes have become 5.4 per cent less affordable over the past 12 months, according to Housing Industry Association data cited at the hearing. That finding cuts against the common assumption that falling prices automatically translate into improved affordability for buyers.
The government's housing policy changes, including reforms to negative gearing and the capital gains tax discount introduced in the May federal budget, have so far failed to deliver more affordable homes or meaningfully increase housing supply. Property downturns are already being felt in some markets, yet the broader affordability picture continues to deteriorate.
ANZ Group chief executive Nuno Matos told the inquiry his bank expects home prices to fall approximately 13.5 per cent from peak to trough, with the market not stabilising until 2028. He also raised broader economic concerns, warning that simultaneous government and corporate spending on artificial intelligence, defence, energy infrastructure and budget deficits was creating dangerous competition for capital at a time when interest rates are already elevated.
"They are contributing to a competition for capital. We never saw this amount of spending in our lives, in our lifetimes," Matos said.
Westpac Flags 30 Per Cent Collapse in Construction Lending
Westpac chief executive Anthony Miller revealed the bank is now lending to 30 per cent fewer housing construction projects than it was up to 18 months ago, a sharp contraction that underscores the pressure gripping the building sector.
Miller stopped short of blaming the federal government's abolition of negative gearing and the capital gains tax discount for the slump, attributing the decline primarily to surging construction costs. Labor's reforms included a carve-out allowing investors to negatively gear new builds, designed to stimulate construction activity, but Miller said the effect had been modest and slow to materialise.
"There is some improvement in that area, but it has not come through as fast or as significant as perhaps we would like," he said.
Miller called on governments to do more to stimulate new building investment and boost supply, arguing that pumping money into demand-side measures alone would not solve the problem. "Providing more resource for the demand side isn't going to solve the problem," he said.
Separately, it emerged the day before the hearing that investor home loans had fallen by a record 30.6 per cent in the year to September. The government welcomed the figures, arguing the retreat of property speculators was opening the door for first home buyers. It also pointed to a rise in the share of investor loans directed at new builds, which climbed from 17 per cent to 28 per cent between the March and September quarters.
Banks Defend Profits as Inquiry Chair Attacks Mortgage Earnings
Inquiry chair and Labor MP Ed Husic put the banks on the defensive over their profitability, stating that big four lenders were making close to $300,000 profit from an average owner-occupier 30-year home loan, a figure he said had grown by $40,000 since interest rates began rising this year.
"A big four bank is making a profit of $234 a week off an average Australian family with an average loan," Husic said.
ANZ's Matos pushed back firmly, insisting the mortgage business is "one of the least profitable businesses in banking in Australia" and that its profitability has declined steadily over at least two decades. He said ANZ was not exploiting cost-of-living pressures but was simply "doing our job."
"All Australians are feeling the pressures of the cost of living. That means inflation is high and interest rates are high, which is not improving the quality of lives of Australians," Matos said.
The political pressure building around household debt and house prices shows no sign of easing, with the inquiry's findings likely to fuel ongoing debate about the role of banks, government policy, and the construction industry in resolving Australia's housing crisis.
