Government needs to get its skates on to lower power costs: NAB boss

National Australia Bank boss Andrew Irvine has urged governments to green-light gas and renewable projects more quickly to help address the high energy costs that are weighing on businesses and households and holding back the economy.

The chief executive of the country’s biggest business bank made the remarks as its full-year results showed NAB was fighting growing competition in business banking, as rivals pile into the lucrative market segment amid a squeeze on retail banking profits.

Irvine on Thursday said the Australian economy is expanding “about as fast as we can grow” without stepping up inflation, and reforms to address rising energy bills and the housing crisis, and reduce red tape, were needed to allow it to grow faster.

When asked how governments could help to address energy costs while still cutting carbon emissions, Irvine replied that both renewables and gas had a critical role to play. He said the “best thing” governments could do would be to approve gas and renewable energy projects more quickly, including both gas-fired power stations and exploration for the fossil fuel.

“Very simply, we need more energy. Much more energy, and that includes renewables, and it includes gas, particularly on the eastern seaboard,” Irvine said in an interview.

“I believe very strongly in the need to decarbonise our electricity system, and meet our climate obligations. But let me be very clear, there is no transition to renewables without more gas.”

Irvine argued gas was needed for both “baseload” power that’s available around the clock, but also “firming,” which refers to electricity that can be called on when needed to back up renewables when it is not sunny or windy.

While the long-term role of gas in Australia’s energy transition remains contested, energy authorities have previously warned NSW and Victoria are at risk of shortages in years to come unless supplies of the fuel are increased.

At the same time as Irvine emphasised the need for more gas projects, a disclosure from NAB on Thursday also showed the bank’s exposure to the oil and gas sector continued to decline. The bank’s policy is to lower its exposure to oil and gas between 2026 and 2050.

Irvine’s comments on energy came as NAB shares fell 3.5 per cent, after its full-year profits edged down 0.2 per cent, to $7.1 billion. NAB’s annual report also showed Irvine received a $1.7 million bonus in his first full year in the job, and his total realised pay was $7.6 million.

A key focus for investors is NAB’s business bank, its biggest division, where profits rose 1.6 per cent. Sydney-based rivals Commonwealth Bank and Westpac, the leading retail banks, have targeted business banking as returns in mortgages come under pressure.

NAB said it had grown market share in business lending, though its margins were lower over the year and bad debt charges edged up.

Atlas Funds Management chief investment officer Hugh Dive said it was “not a bad result” from NAB, but there was little margin for error when the share price was as high as it has been lately. He also questioned if competition was starting to affect NAB’s business bank.

“Are the Sydney banks [Westpac and CBA] starting to eat into the Melbourne banks’ core business? It looks like that’s happening,” he said.

Citi analyst Thomas Strong said NAB’s bad and doubtful debts were above market expectations, and investors were likely to focus on this trend. The market could also be concerned by NAB’s guidance for cost growth in the year ahead, he said, calling it “overall, a slightly soft result”.

Overall, NAB’s revenue increased by 2.9 per cent, helped by loan growth and wider margins, but the bank also had credit impairment charges tick up, mainly because of business customers facing financial difficulties. Taking a further bite out of profits, expenses rose 4.6 per cent, which includes a previously announced $130 million charge due to underpayments of wages and staff entitlements.

In its outlook, NAB forecast economic growth of 2 per cent for this year and 2.3 per cent next year, and Irvine said the Reserve Bank’s decision this week to keep rates unchanged was a sign the economy was “doing petty well.”

“The economy is growing, and it’s frankly growing at about full capacity without being able to generate too much inflation,” Irvine told journalists.

Aside from his comments on energy, Irvine reiterated that housing was “Australia’s biggest societal and policy challenge”, and it was crucial for the nation to increase the supply of homes.

He also called for a focus on “reducing complexity and red tape for businesses” – a long-running priority from big business – and said the country should prioritise giving Australians the opportunity to make the most of artificial intelligence.

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