Hundreds of Australian companies will reveal their annual earnings over the next several weeks in what analysts are calling a "decisively negative" period for profits, with the reporting season set to expose how housing downturns, interest rate hikes, and recent tax changes are hitting workers and consumers hardest.
Market watchers expect big swings in share prices as results come in. Some companies will rise or fall sharply depending on whether they beat or miss expectations. One-fifth of companies that reported profits during the last reporting season in February saw their share price surge or plunge by more than 10 per cent on the day of their announcements, according to CommSec analysis.
Mining Profits Mask Broader Economic Weakness
Analysts are forecasting 12 per cent earnings per share growth in the 2025-26 financial year on average. Australia's largest 200 companies will have grown earnings by about 12 per cent in the past financial year, UBS equity strategist Richard Schellbach said. That would be "the strongest aggregate growth rate in four years, and sit comfortably above the market's long-run annual average of approximately 4.5 per cent."
But when profits from the mining and financial sectors are excluded, that earnings growth rate falls to 2.5 per cent. The disparity reveals how resource wealth isn't translating into broader prosperity for most Australian businesses and the workers they employ.
Schellbach said, "Earnings momentum in Australia has turned decisively negative." He said profit forecasts are being revised lower across all 11 major ASX sectors, including resources, which had previously provided much of the market's positive revision support. "This broadening downgrade cycle raises the hurdle for companies to outperform during August," he said. "Results will need not only to meet reported-period expectations, but also to provide sufficient guidance confidence to arrest further reductions to forward estimates."
Housing Downturn and Rate Hikes Hit Banks
Anna Shelley, AMP's chief investment officer, said, "The reporting season is a very good indicator of how the Australian economy is faring." She said most super funds, including AMP, have about a 25 per cent weighting to Australian shares, making company performance important for superannuation returns that ordinary Australians depend on for retirement.
Shelley said investors should expect "huge swings" in some share prices. She said, "Most people are expecting to see stronger results out of mining companies, and perhaps some softer results out of companies like banks, where the housing downturn is starting to take effect there."
BHP, with a market value of $307 billion, has recently overtaken Commonwealth Bank to become Australia's most valuable company. Commonwealth Bank will announce its full-year results on August 12, while Westpac, NAB and ANZ will provide quarterly trading updates. BHP is expected to announce strong results on August 18.
Interest Rates and Tax Changes Weigh on Households
Ten Cap lead portfolio manager Jun Bei Liu said this will be the first reporting season to show the flow-on impact from higher interest rates. She said companies will also reveal the extent to which the Iran war and higher oil prices have driven up their costs of doing business.
Liu said she's watching for signs of how much confidence has been affected for businesses and consumers after the Albanese government's decision to increase capital gains tax and significantly restrict negative gearing for property investors. She said, "This reporting season, we expect domestic-facing businesses to give a much more conservative outlook."
Schellbach said, "Although the consumer is not collapsing, the rate hikes, tax changes and souring sentiment around the housing cycle have really changed the story." He said companies exposed to the housing cycle are likely to report that activity levels have softened materially.
Retailers JB Hi-Fi, Nick Scali, Baby Bunting, Temple & Webster and Breville are among those due to report earnings in the coming weeks. REA Group, Mirvac and Lendlease may post strong results for the past year but still warn of weak trading conditions ahead.
Cost-of-Living Pressures Hit Healthcare Access
Liu said healthcare companies are likely to deliver "mixed" results because of cost-of-living pressure on customers. "Cost of living is hitting the likes of Cochlear's implants as well as quite a lot of pressure in terms of albumin sales for CSL," she said. The comment underscores how economic pressures are affecting access to medical devices and treatments that improve quality of life.
Meanwhile, miners are expected to post solid results. Rio Tinto reported last week that its half-year underlying earnings jumped 43 per cent to $US6.85 billion, its best result in four years, helped by higher commodity prices and a surge in profits from its copper division. Copper demand has soared in recent years because of the energy transition and strong demand from US tech giants Amazon, Microsoft and Google, which are racing to build massive AI data centres around the world.
Oil companies and refiners such as Ampol, Santos and Woodside Energy are likely to reveal strong results and trading updates over the next few weeks because of much higher oil prices.
Data Centres Offer Growth Amid Broader Slowdown
Liu said she's "most excited" about industrial stocks, data centres and businesses in the AI supply chain such as copper miners. NextDC, DigiCo Infrastructure, Goodman Group, Macquarie Technology and Megaport are among the data centre companies listed on the ASX.
Schellbach said, "We're probably more focused on a lot of the companies that provide the cabling, the processing equipment from a technology point of view, the cement, the energy and even the financing [to data centres]." He said, "So there's many different channels that feed into the data centre investment cycle in Australia, and they really are in a sweet spot right now to deliver strong earnings growth."
Looking beyond reporting season, Shelley said, "the backdrop generally is not as strong as it was." She said there are concerns about the continued elevation of the oil price and that uncertainty in Iran has yet to be resolved. Liu said, "some sectors might be going through a bit of issues such as the likes of our banks, but the rest of the market absolutely is going to outperform." Schellbach said, "From here on forward, we see a pretty tough slog for markets and the economy over the next six months."
Why This Matters:
This reporting season will reveal how economic policy choices and global pressures are distributing costs across Australian society. While mining companies post record profits from resource extraction, the 2.5 per cent earnings growth outside mining and finance shows most businesses are struggling. Interest rate hikes designed to cool inflation are hitting housing-dependent companies and banks, with flow-on effects for workers in construction, retail, and related industries. Cost-of-living pressures are forcing Australians to delay healthcare purchases like cochlear implants, raising questions about whether essential medical access should depend on household budgets. The government's tax policy changes on capital gains and negative gearing are affecting business and consumer confidence, though these measures aim to address housing affordability for younger Australians locked out of the market. With most superannuation funds holding 25 per cent in Australian shares, these corporate results directly affect retirement savings for millions of workers. The concentration of growth in resources and data centres, while other sectors face a "tough slog," highlights the need for economic diversification and policies that ensure prosperity reaches beyond commodity exports and tech infrastructure.