NAB (ASX:NAB) chair signals ‘rational’ responses to curb booming housing market

The NAB share price is falling slightly today. We look at what its Chair, Phil Chronican, had to say about how to curb the booming housing market.

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The National Australia Bank Ltd. (ASX: NAB) share price is falling slightly today, in line with its big four stablemates. At the time of writing, the NAB share price is down 0.45% to $26.57 a share.

This comes after its chair, Phil Chronican, discussed ways in which the government could “take the heat out of the [housing] market” at a Governance Institute lunch in Sydney on Monday.

Limiting Australia’s housing boom

Record-low interest rates have led to a surge in Australian house prices. Currently, prices in Australia’s capital cities are rising at their fastest rate in 32 years. NAB forecasts Australian house prices to rise by 10% over the next 12 months.

Chronican said this was the expected result of the reserve bank’s cash-rate policy. Additionally, he stated that the government could focus on macroprudential policies instead, as a “rational” response to curb the booming housing market. Chronican believes this could address the housing boom without losing the positive effects of a low rate.

Macroprudential policies are centralised regulatory controls in the financial market. They are aimed at identifying and reducing systemic risks. In this case, Chronican believes such policies would be focused on limiting borrowing and credit lending amounts.

‘Unprecedented’ interest levels

Commenting on the current interest rate environment, Chronican said:

We are running an extraordinarily accommodating monetary policy with interest rates at levels that none of us can remember, because they are completely unprecedented.

We shouldn’t be surprised that that’s going to show up in price inflation in some form or another. At the moment, we’re seeing that in asset price inflation, and it’s not just real estate, we’ve seen financial assets as well.

Chronican also highlighted the use of governmental credit regulation in two of Australia’s close neighbours as an example of effective use of these policies:

There are plenty of economies, particularly in economies like Singapore and New Zealand, where macroprudential policies have been brought in for short periods of time to take the heat out of the market. And if that happens, then as I said, that would be understandable.

And I just point out that we’re seeing this strong house price growth at a time when Australia’s population growth is at record lows. You can imagine what the pressure is going to be like as migration is reopened in the coming years.

NAB share price snapshot

Founded in 1982, NAB is among the largest listed companies on the ASX. It is also one of the big four Australian banks in terms of market capitalisation, earnings, and customers. In addition, it is the 21st largest bank in the world by market capitalisation.

The NAB share price has performed well in 2021 so far, up 17%.

This far exceeds the growth of the Commonwealth Bank (ASX: CBA) share price, which has gained 7%. However, it is still below both ANZ (ASX: ANZ) share price gains of 23% and runaway leader Westpac (ASX: WBC), which is up 30%. 

*Editor’s note: this article was amended at 2.30pm 20 April to clarify NAB chair Phil Chronican’s commentary around macroprudential policies and remove incorrect references to credit limitations.  

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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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