SYDNEY (Reuters) -Australia's housing shortage may be driving prices higher but is locking out first-time homeowners and migrants needed to fill skills shortages across the country, the CEOs of Australia's three largest banks said on Tuesday.

After years of ultra-low interest rates pushed home prices higher, Australia faces a long-term drop in the number of younger people buying homes, which could mean more people retiring in weaker financial positions, according to a 2023 government report.

At a banking conference in Sydney, the heads of Commonwealth Bank, National Australia Bank and Westpac, Australia's top 3 lenders, blamed a housing supply shortage and urged local governments to speed up planning approvals.

"For the younger cohort, I think it's really a significant problem," CBA CEO Matt Comyn told the AFR Banking Summit, when asked about a housing market with some of the worst affordability in the world by a measure of debt to income.

Westpac CEO Peter King said that prices will go up when you have a supply-constrained market, but that the current home prices "from a societal perspective, it's too expensive".

He, however, added he was "positive on the housing market" citing "the fundamentals of 'we need more houses developed'".

NAB CEO Ross McEwan told the event the country needed migrants but "we've got to get the impediments out and get the tradies (tradespeople) in and get building".