Australia’s economy is slowly turning the corner, CBA boss says

The Australian economy is slowly improving and millions of mortgage holders will finally feel their disposable incomes rise when the Reserve Bank cuts interest rates next week, as widely expected, the country’s largest bank said as it posted a bumper $5.13 billion half-year profit.

The Commonwealth Bank of Australia on Wednesday morning announced its cash profits for the six months to December 31 rose 2 per cent on the same time last year and climbed 7 per cent on the second half of the 2024 financial year, beating analyst expectations of a $5.06 billion cash profit.

CBA chief Matt Comyn said the Australian economy is slowly turning the corner.Credit: Louie Douvis

CBA will pay an interim dividend of $2.25 per share, up 5 per cent on the prior corresponding period. Its shares – the biggest stock on the ASX – rose 0.4 per cent to $162.74 as of 11.30am AEDT as the wider market edged up 0.2 per cent.

While Australian households and businesses are still being weighed down by cost-of-living pressures, and younger people forced to make “real sacrifices”, CBA chief executive Matt Comyn said the number of customers requiring hardship assistance had fallen in the December half.

“We have seen the effects of the Stage 3 tax cuts and also the energy rebates, and they’re making a difference in terms of savings across our customers accounts,” Comyn said in an interview with this masthead.

“We’ve also seen a reduction in customers requiring financial assistance, reduction in loan losses, but that’s primarily driven by the fact unemployment is so low.

“Notwithstanding that economic conditions have been weaker over the last 12 months, and the pressures that are on households … we’re starting to see a modest improvement in household incomes, and that will continue into 2025.”

The RBA is widely tipped to cut interest rates next week when it meets for the first time this year after figures released last month showed inflation dropped to 2.4 per cent, lower than the central bank had expected. The closely watched measure of underlying inflation rose by 0.5 per cent in the quarter, the lowest rate since mid-2021, taking the annual rate to 3.2 per cent.

On a $600,000, 30-year mortgage, a quarter percentage point cut would deliver a $100 saving on monthly repayments.

Comyn said he expected consumer sentiment to begin rising and household disposable incomes to improve on the back of rate cuts. However, he flagged geopolitical uncertainties remained, private sector growth was weak and immigration has started to slow.

Comyn said it was too soon to forecast what US President Donald Trump’s 25 per cent tariffs on aluminium and steel would mean for local producers and the economy more broadly.

“In the near term, it hasn’t led to any changes in our risk appetite to individual sectors,” the CBA chief said. “I do think overall, though, we should expect volatility both in markets as well as geopolitical risks.”

The bank’s operating expenses climbed 6 per cent in a year to $6.37 billion on the back of rising inflation, the fact that the December half in 2024 had two additional working days, and growing investment in artificial intelligence technology.

The bank’s net interest margin – a key measure of a bank’s profitability as it compares funding costs with what lenders charge for loans – rose two basis points to 2.08 per cent from a year ago.

Half-year profits were also boosted by lower loan impairments, the bank said, supported by rising house prices and lower than expected losses within the consumer finance division. Loan impairment expenses fell 23 per cent from last year, with most mortgage holders ahead of scheduled loan repayments.

While the bank’s troubled bad loan book made up less than 0.1 per cent of its total home loan balance of $685 billion (up 5 per cent compared to last year), Victoria accounted for almost half of CBA’s non-performing, not well-secured home loans.

Comyn said business sentiment in Victoria was weaker than in other states, and while he wouldn’t be drawn on the policy levers the Allan government needed to pull, he said economic growth relied on net interstate migration, “the right balance” between public and private investment, and the state being perceived as being business-friendly.

The banking boss welcomed the federal government’s move to make regulators change the lending rules to enable students with HELP debts to borrow more for a home, saying he expected the reforms to impact some 12 per cent of the market.

Investment bank Saxo’s Junvun Kim said CBA’s results reflected a “resilient stance amid economic headwinds”.

“While cost-of-living pressures persist, CBA’s solid [capital] and favourable labour market conditions position it well for future growth, with an anticipated interest rate easing cycle in 2025 offering additional optimism.”

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