NAB CEO Andrew Irvine warns Australia recession possible as oil crisis drives inflation and rate rise risks

National Australia Bank chief executive Andrew Irvine is warning a recession is possible in Australia, as higher business costs fuel inflation during a global oil crisis.

“While I don’t think it’s probable, it certainly is possible,” he told reporters on Monday at a half-year results presentation.

“Our central forecast is we don’t see a recession, but I would say that we all need to have lots of humility in how we think about forecasting right now, because the volatility and uncertainty is very, very high and I would say the margin of error in forecasting right now is meaningful.

“The duration and intensity of this liquid fuels crisis is going to be significant and we’ll also need to see how our customers respond to the possibility of an interest rate rise at the same time.”

Higher inflation and the first month of the Middle East oil crisis caused a 26 per cent plunge in NAB’s cash profit for the six months to March 31, covering the first half of 2025-26 financial year.

Mr Irvine, who leads Australia’s biggest business lender, said some firms may have to put up their prices to survive, which could potentially lead to even higher inflation during a global oil crisis.

“Businesses have to make an economic profit, and they can’t trade insolvent or have any issues with regard to their margins,” he said.

“Every business has to make a decision on whether or not they can take the input cost pressure in their business or if they have to pass that on and what their ability to pass price rises on is.”

Mr Irvine said a minority of home borrowers with poor savings would struggle with rate increases.

“It’s on the margins, there will be households that are entering hardship and we’ll be there for those customers,” he said.

With NAB’s own survey showing business confidence levels are plunging, Mr Irvine said NAB was focused on risk management in certain lending segments.

“There will be businesses likely, in certain sectors, that will need more help,” he said.

“There’s a likelihood that we may see some stress in those sectors.”

NAB made a statutory net profit of $2.75 billion for the six months to March 31, which was 19.3 per cent weaker compared with the corresponding six months to March 2025.

Without significant items, NAB’s cash profit plunged by 26.3 per cent to $2.639 billion.

The effects of the Middle East oil crisis are yet to affect NAB’s lending portfolio with the proportion of non-performing loans declining by three basis points to 1.52 per cent, when the first half of 2025-26 was compared with the second half of 2024-25.

NAB reported an improvement in business and private banking but an increased impairment in a small number of larger corporate and institutional banking customers in the first half of fiscal 2026.

“While underlying asset quality outcomes have generally improved in 1H26, the outlook is more uncertain as a result of the Middle East conflict which presents a key source of downside risk,” it said.

Financial markets widely expecting another 25 basis point rate hike from the Reserve Bank of Australia on Tuesday which would take the cash rate back to 4.35 per cent for the first time since February 2025 before the first of three rate cuts.