Australian Shares Slip as Westpac Rout Hits Banks Ahead of RBA Decision

Australian stocks opened lower on Monday as a sharp decline in Westpac shares put pressure on the country’s banking sector. Gains among mining and gold companies helped limit the broader market’s losses, but investors remained cautious ahead of the Reserve Bank of Australia’s upcoming interest-rate decision.

The benchmark S&P/ASX 200 index was down 0.5% at 9,220.30 points by 0057 GMT. The decline came after the index had delivered a strong 3.2% gain during the previous week, leaving investors focused on whether the latest weakness would prove temporary or signal renewed concerns around the financial sector.

Westpac Shares Drop Sharply

Westpac emerged as the biggest drag on the market after the bank reported weaker mortgage activity and warned of a significant slowdown in investor housing credit growth.

The lender’s shares fell more than 5%, marking their steepest intraday decline since March 30. The reaction reflected investor concerns about the outlook for Australia's housing market and the potential impact of weaker lending activity on bank growth.

Westpac reported cash earnings of A$1.8 billion for the quarter ended June 30, compared with A$1.9 billion during the same period a year earlier. More importantly for investors, the bank said mortgage applications had fallen 20% and projected that investor housing credit growth would be roughly half its expected pace next year.

The housing-related warning appeared to weigh on the broader banking sector. Australia's financials sub-index fell 1.9%, recording its largest intraday decline in three months.

Shares of Commonwealth Bank of Australia, ANZ and National Australia Bank also moved lower, with losses ranging from 1.3% to 2.4%. The weakness across the major lenders reinforced concerns that softer housing activity could become an important issue for Australian banks in the months ahead.

RBA Decision in Focus

Attention is now shifting toward the Reserve Bank of Australia's monetary policy announcement, scheduled for Tuesday.

Financial markets are broadly expecting the central bank to leave interest rates unchanged. Even without a rate move, however, investors will be watching the RBA's accompanying signals closely for indications about the future direction of monetary policy.

The central bank's assessment of economic conditions could influence sentiment across interest-rate-sensitive sectors, particularly banks and housing-related companies. For investors, the combination of Westpac's weaker mortgage figures and the upcoming policy decision has made the Australian financial sector particularly important to watch.

Mining Stocks Provide Support

The decline in financial stocks was partly offset by strength in Australia's large mining companies.

The mining sub-index climbed 1.4%, supported by firm metal prices. BHP and Rio Tinto each gained more than 1%, while Fortescue advanced 0.7%.

Gold stocks performed even more strongly. Australia's gold sub-index rose more than 3%, reaching its highest level since mid-April as bullion prices moved higher.

Gold miners Evolution Mining and St Barbara both advanced, gaining 1.3% and 4.7%, respectively. The performance of precious-metal companies provided an important counterweight to the weakness in banks and helped prevent the broader Australian market from falling more sharply.

Treasury Wine Estates Jumps

Among individual companies, Treasury Wine Estates was another notable mover.

The wine producer's shares jumped nearly 8% after the company announced plans to reduce the size of its U.S. North Coast vintages from 2026 and record inventory write-downs, primarily involving bulk wine.

At the same time, the company raised its forecast for fiscal 2026 unaudited earnings before interest, tax, SGARA and material items to A$492.3 million. That figure was above its previous guidance range of A$480 million to A$490 million, helping drive the strong rise in its shares.

New Zealand Market Moves Higher

Elsewhere in the region, New Zealand stocks moved in the opposite direction.

The benchmark S&P/NZX 50 index gained 0.5% to reach 13,892.88 points. The contrasting performance highlighted the different sector and company-specific forces influencing markets across the region.

For Australian investors, however, the immediate focus remains on the banking sector and the RBA. Westpac's mortgage figures have raised fresh questions about housing-related lending growth, while the central bank's policy decision could provide a clearer indication of how policymakers view the economic outlook.

With mining and gold stocks offering some support, the direction of Australian equities in the near term could depend heavily on how investors interpret the RBA's message and whether concerns surrounding housing credit spread further across the banking sector.