50,000 white-collar jobs under pressure as banks switch to automation

Amid the NAB’s round of mass sackings, nationwide more than 50,000 financial services jobs are in the firing line.

NAB CEO Andrew Thorburn has announced plans to sack 6000. Picture: Hollie Adams

More than 50,000 financial services jobs across Australia are in the firing line as automation and technology accelerates through service companies over coming years.

Fears of a shake-up in traditional white-collar roles, roles that until now have been immune from cost cuts, have been sparked by National Australia Bank’s decision to sack 6000 workers — announced weeks before Christmas — and have unnerved politicians across the spectrum.

The job cuts, which are planned over the next three years, were announced on Thursday as the Melbourne-headquartered lender handed down a 2.5 per cent increase in annual cash profit to $6.64 billion. The cuts, equal to roughly 20 per cent of the bank’s existing workforce, are part of a dramatic plan to automate more of the lender’s operations.

Scott Morrison said it was up to NAB’s leadership to explain the job cuts to the community.

For its part, NAB is replacing the 6000 workers by hiring 2000 more with expertise in digital technologies, artificial intelligence and robotics. While official statistics show the banking sector in Australia employs about 160,000 workers, figures by consultant AlphaBeta found a third of a banker’s day-to-day job was vulnerable to automation.

Research from investment bank Citi estimates about 30 per cent of bank branch staff will be phased out by technology, potentially threatening 50,000 employees.

Kevin Davis, a member of the government’s Financial System Inquiry, said more and more back office staff in banks would face automation in coming years and that regulation — not fintech challengers — was likely to be the biggest threat to the major banks.

“A lot of fintech companies that are starting up will still be purchased by the banks. The biggest threat for the incumbent banks is the open banking regime, which provides the opportunity for people to more easily switch banks and get information about where they can get the best services from,” Professor Davis told The Weekend Australian.

As NAB announced its job cuts on Thursday, the Treasurer revealed the government would force the major banks to share customer credit history so smaller challengers could better price risk and undercut the big four banks, which control 80 per cent of the financial services market. Meanwhile, the falling cost of technology is already making it cheaper to build robots than to pay staff.

According to management consultancy AT Kearney, on average a software robot costs one-third as much as an offshore employee — and one-fifth as much as onshore staff.

NAB chief executive Andrew Thorburn said the bank was aiming to get ahead of the technological disruption swamping the industry. But analysts have already raised doubts about NAB’s plans to strip costs out of the business and drive greater revenue growth, with the disruption faced by employees concerned about redundancies expected to hamper efforts to improve the bank’s bottom line.

Amid concerns from customers that branches across the country will be shuttered, Mr Thorburn said the bank closed 18 sites last year and that that rate of closure would “probably” continue.

“We will close some branches; we don’t have a target. It’s more that as that trend continues we will review those,” Mr Thorburn said yesterday. NAB has plans to shift some of those closed branches to new sites in growth suburbs in western Melbourne and Sydney. Most of NAB’s job cuts are expected to come from the headquarters in Melbourne and Sydney.

South Australian Treasurer Tom Koutsantonis said the job cuts were “staggering”. The state government this week was knocked back in its attempt to legislate its own major bank levy, which would piggybacked off the federal government’s $6.2bn tax unveiled earlier this year. The bill is expected to be sent back to the state parliament’s upper house by the middle of the month.

“If the banks have stopped creating jobs, they should be willing to put a small fraction of their super profits towards other businesses that do create jobs,” Mr Koutsantonis told T he Weekend Australian.

The Australian Bankers’ Association has been campaigning against the SA levy with the slogan: “Jobs. Not Taxes.” ABA chief executive Anna Bligh did not return requests for comment.

West Australian Treasurer Ben Wyatt, whose government has been considering a bank levy, said the slashing of jobs showed that large businesses made decisions about their workforce regardless of government decisions. “Small imposts such as the one planned in SA and potentially elsewhere make very little impact on decisions regarding workforce numbers,” Mr Wyatt said yesterday. He said the WA government was “investigating all possible revenue measures” after it failed to legislate a planned gold royalty in the state.

Members of Canberra’s House of Representatives economics committee, which runs twice-yearly grillings of bank chief executives, were also unimpressed. Labor MP Matt Keogh said the job cuts were “disturbing” and attacked the decision to release “damning information” just weeks after Mr Thorburn attended parliamentary hearings in October.

“Such an approach only further undermines the trust and confidence of consumers and the employees of the banks,” Mr Keogh told The Weekend Australian.

Deputy chair of the committee, Matt Thistlethwaite, questioned why the bank created “heartache and worry for thousands of employees” at the same time it signed off on “billion-dollar profits”. Mr Thistlethwaite told The Weekend Australian the banks were “adept” at releasing “dirty laundry” immediately after parliamentary hearings. He said a royal commission was “the only way to achieve full disclosure and justice for Australians”.

Liberal MP Craig Kelly was more optimistic. “There’s always been concern about new technologies coming along and taking jobs. But history shows whenever that happens it increases the wealth of society,” Mr Kelly said.

“If one bank pulls back their front-line services, customers should migrate to another bank. We can’t go instructing the private sector about how many people they should be employing.”

Nationals MPs have applied continual pressure on big companies to keep services in regional areas, such as bank branches and ATMs. Nationals senator John Williams said he would be disappointed if the bank closed regional branches. “We’ve already had enough of those closed over the years,” Mr Williams said.

UBS analyst Jonathan Mott said he was sceptical of NAB’s ambition to cut costs and generate revenue. He said the bank would face challenges “given likely business disruption (employees concerned about redundancies), its weak starting point and the fact that competitors are not standing still”.

Business Council chief Jennifer Westacott said the financial industry had to manage the job losses expected to swamp the industry. “And we’ve got to manage it with government,” she said. “Pretending it’s not going to happen is very dishonest as well.”

Ms Westacott said banks needed to help workers retrain to either be relocated within the bank or in other sectors. “When I’ve spoken to all the banks, they know this is a problem and they know they have to do that,” she said.

Mr Keogh said the job losses were a further example of the impacts of an increasingly automated economy and showed the need for government to ensure education and training is improved.