It’s no secret that Australia’s big banks are making record-breaking profits. As the cost of living in Australia continues to increase, the average person is finding it harder to make ends meet. Meanwhile, the banks seem to be enjoying an era of unprecedented profitability. How is this happening, and what can we do about it?
The Unsettling Profitability of Australian Banks
In recent times, Australia’s major financial institutions have been posting staggering profit figures. For instance, the Commonwealth Bank, Australia’s largest lender, posted a record $10.16 billion cash profit. This was achieved even as more of its customers succumbed to rising financial stress.
The big four banks – ANZ, Commonwealth, NAB, and Westpac – were forecasted to post a combined $16.2 billion six-month cash profit. These figures stand in stark contrast to the economic reality faced by many Australians who are grappling with a cost-of-living crisis.
Commonwealth Bank’s 2022-23 results were 6% higher than a year earlier
Ranking second globally
Highest since 2001, driven by higher prices in a range of services categories including rents, restaurant meals, holiday travel and insurance.
Through the year to the June quarter 2023
Making it one of the least affordable housing markets globally
The Rising Cost of Living in Australia
The cost of living in Australia has been on a sharp rise over recent years, causing significant financial stress for many households. As per the data from the Australian Parliamentary Department, the Consumer Price Index (CPI) increased by a staggering 5.1% in the 12 months leading up to March 2022. This is the highest annual rise reported since the GFC and represents a significant burden for everyday Australians.
A detailed look at the numbers paints a sobering picture. According to Expatistan, the estimated monthly costs for a single person living in Australia stands at AU$4,389. For a family of four, this figure jumps to an estimated AU$7,859. This includes housing, food, utilities, petrol, healthcare, and education fees.
To give you a clearer idea, let’s break down some of these costs:
- Groceries and eating out can range between $80 to $280 per week.
- Gas and electricity can add another $35 to $140 per week.
- Phone and Internet bills come in at around $20 to $55 per week.
These figures only represent the basics. When you factor in additional expenses like housing, healthcare, and education, it’s easy to see why many Australians are feeling the pinch. Even outside the major cities of Sydney and Melbourne, which are known for their high cost of living, individuals and families are finding it increasingly difficult to maintain a comfortable lifestyle.
In essence, the rising cost of living in Australia is a pressing issue that hits the average Australian where it hurts: the wallet. With the big banks seemingly more interested in profits than people, it’s crucial to find alternative solutions that put the needs of individuals and families first.
How Banks Are Making Profits Amid A Crisis
You might wonder: how are the banks able to make such enormous profits while many Australians are struggling financially? The answer lies in the business model of the banks.
Banks generate profits from the interest they charge on loans. In a period where interest rates are low, more people are likely to take out loans. This has led to a surge in lending, thus increasing the banks’ profits.
Additionally, banks have also benefited from the government’s stimulus measures during the pandemic. This has resulted in fewer loan defaults than expected, further boosting their bottom line.
The Impact on Everyday Australians
While the banks are reaping record profits, many Australians are facing financial hardship. The rise in the cost of living, coupled with stagnant wage growth, has left many struggling to keep up with their expenses.
This situation is worsened by the fact that banks, despite their profits, continue to close branches and ATMs, cut jobs, and increase fees. These actions make it harder for consumers to manage their finances efficiently and affordably.
My Family Finance Solution
At My Family Finance, we believe there’s a better way. We understand that managing your finances can be challenging, especially in these uncertain times. That’s why we are committed to providing simple, transparent, and affordable financial solutions.
Our goal is to empower you to take control of your financial future. We offer a range of services, from budgeting tools to financial advice, all designed to help you make informed decisions about your money.
We also believe that financial education is key to breaking the cycle of debt and financial stress. Our team of experts are always on hand to provide guidance and answer any questions you might have.
While it may seem like the big banks are profiting at the expense of everyday Australians, remember that you have options. My Family Finance are here to help you navigate your financial journey with confidence and ease.
Disclaimer: This blog post is intended for informational purposes only and does not constitute financial advice. Always consult with a financial advisor before making any major financial decisions.
Sources:
- Commonwealth Bank posts record $10bn profit amid rising stress for borrowers – The Guardian
- Commonwealth Bank earnings top $10 billion as interest… – ABC News
- Australia’s big four banks may be at peak profitability but fat… – The Guardian
- Australia’s CBA posts record FY profit, says arrears rising… – Reuters
- Why Are Australian Banks Making Record Profits? – VICE
- Australia’s cost of living – Parliament of Australia
- Consumer Price Index, Australia – Australian Bureau of Statistics
- Cost of Living in Australia – 2023 prices. – Expatistan
- Cost of Living in Australia | Expenses for Students and Expats
- Australia’s indebted households critical to soft landing hopes next year – Reuters
- Wage Price Index, Australia – Australian Bureau of Statistics
