Europe's cost of living crisis

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Australia is hurtling into a new political era, and the Victorian election will be where the change happens. I'm Raph Epstein, and every Friday, I'm taking over the Politics Now podcast to explore the forces changing Australian politics. Can One Nation turn its popular support into political power? Are voters sick of the Labor Party? And can the Liberal Party finally win in Victoria?

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Carrington Clarke (0:38)

One of the country's biggest and most powerful companies is cutting about 6% of its workforce. National Australia Bank's shedding of 2,500 jobs will cause anguish for many of those directly impacted, but does it also tell us something about what could be on the cards for others working in finance? Meanwhile, in France, after a weekend of the worst civil unrest in decades, markets are nervously waiting to see what the political response will be. Is France the most precariously balanced domino on the board?

Welcome to ABC Business Daily.

Ian Verrender (1:14)

And I'm Ian Verrender, the Chief Business Correspondent.

Carrington Clarke (1:17)

Ian, let's start with this breaking news this morning from NAB. So, shedding 2,500 jobs by mid next year, by the end of the financial year, but 1,500 of them will go very shortly by the end of this year.

We're well into October at the moment. Now, they say they'll also cut back on the use of contractors and consultants. So, this will not just be people within the bank. It means they're going to be spending less money on people indirectly employed by the bank. They say they're focused on cutting senior management roles, that basically people up in the senior ranks will basically have more responsibilities for managing larger teams, it looks like, and that no direct customer-facing roles will be affected. It's going to cost them about $300 million in restructuring costs. So, that's redundancy, shuffling around maybe some of the real estate, etc. This is significant, right? This is a big number. It's a very big institution, but it's a big number of jobs going at once. It follows on from what we saw from ANZ. They shed about 3,500 jobs. That shedding is just wrapped up now.

What should we make of this?

Ian Verrender (2:27)

Well, the Reserve Bank Governor, Michelle Bullock has made no secret of the fact that she'd like to see a loosening as the Reserve Bank likes to put it in the jobs market, and here it is with a third really. This is a significant proportion of the bank's workforce, about 6 percent of the workforce that doesn't take into account the contractors and the consultants that are going to be laid off as well.

I guess the bank is trying to make it a little more palatable by saying that it's senior management levels and duplicate management roles that are going to be done away with. It's not going to be ordinary workers within the bank.

But I think you've got to ask the question, well, what's driving this? And there's probably two factors. One is that you're seeing a slowdown in the rate of lending growth, and in some cases, in some areas, not more than a slowdown, you're seeing things actually go into reverse. And then you've got the impact of artificial intelligence as well. And they haven't really broken down how AI is going to impact the organization and what role that plays in this. But clearly, we're seeing a slowdown in lending growth. So that would be a major factor in this. You've got to try and cut your costs to accommodate the downturn in revenue, really.

Carrington Clarke (3:48)

Yeah, and we know that shareholders of the big banks, they really demand that their dividends are kept where they're at, if not growing, right? And so, if the bank is looking, if banks are looking potentially at their profits starting to look squeezed, and again, these are very profitable organizations. And I think sometimes people get annoyed at the idea of very profitable organizations cutting staff, but that is the nature of the beast.

They're also responsible to their shareholders. And so, if we've got lower lending growth, they think that they're potentially not going to be making as much money on that end. They have to kind of figure out where they can cut costs elsewhere, don't they? And the most obvious place to cut when you're one of these institutions is headcount, and that's where you can make those savings. Yeah.

Ian Verrender (4:34)

Look, our big four banks, you're right, they make enormous profits. But if you have a look at the profits over the past five or so years, they haven't really moved that much. And each year they come in a couple of percentage points above maybe where it was last year, really not much change at all.