Global Markets | Australia shares fall as CBA plunges 10% on earnings miss, housing tax changes

Australian shares slid on Wednesday as investors dumped Commonwealth Bank and other lenders, with the top bank's profit miss amplifying worries that Canberra's proposed curbs on property-investor tax breaks could slow mortgage demand.

The S&P/ASX 200 ‌ended 0.5% ⁠lower at ⁠8,630.40, extending its slide to 2.8% over the past four sessions. Australia's largest mortgage lender Commonwealth Bank sank ​10.4% posting its weakest session on record erasing A$29.93  billion ($21.66 billion) in market value after an ​earnings miss and fresh Middle East-related provisions darkened the outlook for the banking sector. The financials sub-index down 4% to a 5-month low.

The budget proposed restricting negative gearing ​to newly built homes and replacing the 50% capital ⁠gains tax ‌discount with inflation indexation, changes aimed at shifting investor demand away ​from existing ​properties and toward new housing.


The proposals could weigh on Australia's ⁠major banks by cooling demand for mortgages, a key profit ​driver, as reduced tax incentives for property investors may slow ​buying and selling of existing homes.

For most long-term investors, the effective tax burden will be higher than under the current regime and this anticipated behavioural adjustment could weigh on rate-sensitive financial services sectors, and may prompt a wave of pre-reform selling as the July 2027 implementation date approaches, said Dilin Wu, Research Strategist at Pepperstone.

"These ‌stocks are held by retail investors and retirement fund precisely for yield and franking credits. Change the after-tax return calculus, and you change the marginal buyer. That's a slow burn, ⁠but it's real." Conversely, real estate stocks gained 1.2%, lifted by optimism that budget introduced first-home buyer support could funnel demand into new build.

Developers Mirvac and LendLease rose 3.9% and 1.3% respetively. Miners advanced 2.1% to over two month high, buoyed by firmer copper prices. Minings giants BHP and Rio Tinto jumped 2.9% and 1.9% to fresh record highs. New Zealand's benchmark S&P/NZX 50 slipped 0.1% to 13,063.06 after a fiscally tight budget aimed to curb day-to-day spending while boosting investments in infrastructure, defence and energy sectors.