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Tax concessions on deposits should be a key priority for the October tax forum if the banking system is to address its chronic over-reliance on offshore wholesale funding, according to National Australia Bank finance director Mark Joiner.

Mr Joiner also warned of extra costs as a result of global capital and liquidity reforms to cut the risk of another financial crisis.

With short-term wholesale funding no longer an option under the new rules, NAB had to raise a further $45 billion-$50bn of long-term debt just to maintain the size of its loan book, let alone grow it, he said.

“So I think we’re going to go through a period where access to credit, possibly, and certainly the cost of credit, will be more difficult,” Mr Joiner said.

“That’s the real challenge, and if we don’t deal with it, we won’t have a AAA system, and we won’t have AA banks, and we’ll pay the consequences.”

The NAB finance chief also intensified the push for tax relief on deposits, in line with concessions offered to other asset classes such as superannuation.

This, he said, was the key to a lasting resolution of the banking system’s structural weakness — too much reliance on more volatile offshore funding.

Mr Joiner said Canadian banks now had cheaper access to global funding markets, despite their lower credit ratings, because they had access to a deeper pool of domestic deposits.

Domestic savings rates, he said, had not kept pace with credit growth. Nearly all the growth had come from offshore debt, with major bank liabilities spiking from 7 per cent of assets in 1990 to 24 per cent last year.

“This represents a long-term structural challenge for Australia’s economy and our ability to fund economic growth, create wealth and improve national living standards,” Mr Joiner said.

Responding to a question, he sounded a sombre note on housing prices, saying they were unlikely to rise because prices were “out of step” with international trends and affordability was very low.

The commentary is likely to annoy Commonwealth Bank and Westpac, which have much larger mortgage books than NAB.

The Sydney-based banks have often argued that the domestic market is supported by strong migration and a shortage of housing stock. But Mr Joiner said that when he advanced such arguments to international investors, they responded that he sounded like the CFOs of Irish banks.

“People will realise that taking a 2 per cent pre-tax yield on renting a house that isn’t going up in value doesn’t make sense if you are paying 7-8 per cent for the associated loan,” he said.

People were likely to “fall out of love” with property, as they would with equities, with offshore investors generally of the view that local stocks had “had their run”.

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Credit growth of 15 per cent-plus was seen as a thing of the past, and the mining boom was largely “priced in”.

Mr Joiner predicted a re-allocation towards fixed income.

As to the impact on housing bad debts, he said it was “possible” loss rates could tick up from their extraordinarily low level of 0.04 per cent of the home-loan book.

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“But we don’t see a major correction (in housing prices),” he said. “We see it languishing for a while.”

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Mr Joiner also expressed a strong view on environmental biodiversity, arguing there was a failure to recognise its importance in business value and risk. Currently, there was an ad hoc examination of issues like carbon and water allocation rights. “Biodiversity brings all the environmental issues into one measurable place.”