Australian banks are well-positioned to navigate near-term economic headwinds, though loan growth is projected to moderate, according to major credit rating agencies. Fitch Ratings noted in a July report that intensifying competition among lenders is likely to spur a stronger appetite for business lending. Fitch also highlighted that investor loans accounted for 38% of all new mortgages across major institutions as of Q4 2025.

Concurrently, Australia’s banking sector is undergoing structural consolidation. The number of authorized deposit-taking institutions has dropped by 114 since 2004, driven significantly by a wave of mergers among mutual lenders over the past three years. S&P Global Ratings reported that mutual institutions are increasingly joining forces to establish scale, targeting threshold asset bases of A$20 billion. S&P previously estimated in 2024 that up to 40 lenders could consolidate or exit the market. However, consolidation has faced some hurdles, highlighted by high-profile deal cancellations such as the planned merger between Great Southern Bank (formerly Credit Union Australia) and Police & Nurses Limited, which was abandoned in early 2026.

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