Australia’s economy is showing signs of a two-speed recovery, with Victoria and New South Wales facing more significant pressures than the other states, according to National Australia Bank (NAB) Group CEO Andrew Irvine.
Irvine noted that residents in Australia’s two most populous states were forced to make tough financial decisions, struggling with higher living costs, and economic challenges, he told the House Standing Committee on Economics on Aug. 30.
In contrast, Western Australia, Queensland, and the Northern Territory were experiencing stronger economic growth, outpacing the national average.
“In these regions, agricultural sectors are thriving, with new trucks and tractors seen in towns, signalling prosperity,” he said, adding that Australia may have had one of the best agricultural harvests in recent memory.
However, the situation in Victoria and New South Wales was markedly different.
These economies—heavily reliant on retail, finance, construction, and manufacturing—are more closely tied to domestic demand and interest rate settings, making them more vulnerable to financial pressures.
“These regions are performing slightly worse than the national average, with residents feeling the strain,” Irvine told the Committee.
The NAB CEO also revealed efforts to stem scams had been largely successful with $100 million of potential payments avoided by customers from March 2023 to June this year.
How Are Mortgage Holders Handling the Stress?
The economic divide is further accentuated by demographic factors.Irvine described the country as being broadly split into three cohorts: households that own their homes outright—often older, retired individuals with excess savings and minimal debt; those who are still paying off mortgages; and renters or those with significant financial obligations.
The first group is faring well, benefiting from higher deposit rates and continuing to spend, thus sustaining the economy.
“The second cohort includes people who own a home and have a home loan. Within that category, younger families who’ve bought a house maybe in the last five years are probably doing it toughest,” he added.
On a positive note, Irvine mentioned that employment levels remain constructive, with most people still having jobs, which has helped keep the economy going.
However, he emphasised that the third group—renters—faces the most significant challenges.
“I’ve spoken to consumers who’ve had rents increase 50 to 60 percent in the last couple of years, and while incomes have risen, they haven’t kept up with that sort of rental increase,” he said.
In Western Australia, the Northern Territory, and Queensland, customers are doing well and are ambitious to grow, particularly in sectors like mining and resources.
“In other sectors and geographies, like retail and parts of the construction industry, customers are doing it tougher,” Irvine noted.
The CEO also warned this could lead to poor sales during the Christmas season.
According to the NAB Consumer Sentiment Survey, cost of living pressures remain a significant source of stress, with one in three Australians reporting “very high” stress levels.
In the most recent quarter, 1.6 percent of NAB customers were past due for 30 days on their mortgage payments, and 0.8-0.9 percent were past due for 90 days.
Outlook for the Economy
Despite the challenges, Irvine expressed hope that the economy would grow faster in the second half of the year and that consumer confidence would improve before Christmas.“Business conditions are only slightly below the long-term average. We do, however, expect the economy to grow more quickly in the second half of the year,” he said.
He added that he is optimistic about the impact of recent announcements around tax cuts and energy rebates.
“I think it’s still a little bit early for us to see the data show up, but our expectation is that these measures will make a meaningful difference to families up and down the country,” Irvine concluded.
