Banks' growth problem; wages won't stop rate cut; cattle prices soar

Banks' growth problem; wages won't stop rate cut; cattle prices soar

News in brief

Australia’s big four banks made a combined $15.3 billion in their half year reporting season, with Commonwealth Bank reporting a 6pc rise in cash profit in the third quarter. But future growth will be tough, with tech costs rising, more competition for business lending, and more customers considering non-banks.

 

Annual wages growth increased to 3.4% in the March quarter from 4.2% in December. The quarterly rate was 0.9%. It's roughly in line with RBA expectations, and shouldn't stop an interest rate cut next week.

 

Local wine exports are rising, thanks to big demand from China. But what we are selling overseas has changed quite a bit, with shiraz now our top export, followed by chardonnay and cabernet sauvignon.

 

Australian cattle prices have hit their highest level in more than two years, helped by favourable rainfall and heightened trade tensions between the US and China.

 

Microsoft will cut about 6,000 jobs or 3 per cent of its global workforce as it seeks to slash costs and pare layers of middle management. It’s the latest round of job cuts at big tech companies with both Amazon and Meta in the process of cutting thousands of roles.

Fear-o-meter

Is the era of great big bank profits over? Probably. Total profit for Australia’s big four banks for the first half of their respective financial years came in at $15.3 billion.

 

That’s flat, when you remove the impact of acquisitions like ANZ buying Suncorp’s banking operations, according to PwC. It is definitely nothing to write home about.

 

Net interest margins were steady, notwithstanding deposit levels are at their highest in ten years. Deposits provide cheap funding for bank loans. High deposits and flat net interest margins mean the lending side must be going the wrong way.

 

All the big four compete ferociously in the mortgage market, and they are pushing hard into business banking - traditionally the preserve of NAB. But lenders outside the big four are growing faster than the banks in the business market.

 

Just as concerning is that younger Australians - Gen Z and Millennials - are 50 per cent more likely to consider non-banks for core-banking services.  

 

Australia has some of the safest banks in the world. It’s just hard to see where their growth is going to come from.

Who's talking today?

On the performance of the banks and the outlook for the sector:

 

"Top line revenue is up. And what we're seeing is that there has been a real focus on the mortgages side to chase better margin. And that's a shift to proprietary lending. So to try to bring back some of that margin that was lost in that commodity trap of the mortgage head on head competition that we saw over the last sort of 18 to 24 months. 

 

And then on the business side, everyone has pivoted towards business and that is to try to find some of that better margin. But of course, as everyone pivots towards that and competition increases, we are starting to see maybe some early signs of price competition in that segment as well. Interestingly, I think in the business segment as well, we're seeing that system growth outpaced the majors. And so there is competition coming from the non-majors as well in that segment."

It’s Thursday the 15th of May 2025, and Australia’s big banks report more than $15 billion in half year profits, but future growth looks tougher. Local cattle prices hit a two year high, shiraz becomes our top wine export, and Microsoft joins others in big tech to slash staff. Plus the latest wages data shouldn't prevent an interest rate cut next week.

Greed-o-meter

44%	Aust's share of global goatmeat export market value
$237.5 million	value of our goatmeat exports
2.36 million	number of goats processed here per year
47%	Vic processes more goats than any other state
1.1	goat meals per person per week in US, our main market

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News that cattle prices are at two year highs sent us down a few rabbit holes - and somehow, we ended up at goats. Did you know that Australia is the largest exporter in the world of goatmeat? 

Listen to today's episode 🎧 

Source: MLA (Meat & Livestock Australia)

Team Fear & Greed is ready to ride!

Today's the day! Sean Aylmer and Adam Lang from the Fear & Greed team leave Bourke this morning on a 380km ride through western NSW. This photo shows the broader team riding under the Fear & Greed banner, all doing their bit to raise money for country kids.

 

The Ride For Country Kids is a major fundraiser for Royal Far West, and aims to improve life options for kids from rural communities.

 

Neither Sean or Adam are cyclists - so this is well outside their comfort zone. And apart from a newfound fondness for lycra, there's a bit of apprehension about what's ahead. 

 

The support from Fear & Greed listeners has been fantastic. If you can help get the team across the line it'll be very much appreciated - you can donate here.