Australia’s retail banks are facing a growing bad debt burden, but this shouldn’t cause mass redundancies or recruitment freezes.

The next six months will probably bring us more of the same: selective high-end hiring for niche jobs, replacement of business-critical positions, and some small-scale layoffs, particularly in the back office. The Big Four’s debt problems won’t make the employment market in Sydney and Melbourne as bad as New York and London.

Earlier today Westpac reported a 1.2% fall in net profits for the six months ended March 31 as a three-fold jump in impairment charges for bad loans helped to offset higher revenues generated from its acquisition of St George Bank.

ANZ’s profits plummeted by 28% in the same period as its dodgy debts almost doubled. NAB, which kicked off the banks' reporting season last week, has revealed that its bad loans rose to $1.8bn, up from $700m.

But notwithstanding these recent results, local firms remain in better financial shape than many credit-crunched foreign banks.

“The financial crisis has made the Australian banks comparatively more attractive places to work for many candidates. Despite the bad debts on their books, they should be able to recruit high performers for head office roles,” says Luke Heath, chief executive of Chandler Heath Executive Recruitment.

Senior line managers at domestic banks see the current market as an opportunity to add high calibre people to their teams, adds Heath. “Their financial markets divisions are very profitable and they now have a potential hiring advantage over some investment banks.”

Warren Price, managing director of Select Personnel, says the Big Four will still take on “specialists and revenue generators”, but he doesn’t expect any growth hiring for generalist jobs.

“I don’t think we’ll see massive retrenchments either, and the banks will still have to replace their young staff who choose to go overseas,” says Price.

Heath agrees: “Overall, hiring will be circumspect and slow over the next six months, as it has been for the last six months.”

How do you see recruitment at the Big Four shaping up for the rest of 2009? Let us know below.