Australia’s biggest non-mining companies are riding a swell of optimism into the reporting season, setting the scene for better-than-expected profits after two weak years retarded by high inflation and interest rate rises. With the first leg of the year’s bi-annual earnings seasons entering full stride this week, analysts are tipping ASX200 companies outside of mining to better forecasts on the back of improving economic conditions and recovering consumer confidence that has been partly fuelled by the prospect of an interest rate cut this month. “Australian companies look set to deliver a beat in the upcoming results,” Macquarie said. It said that since the downbeat outlooks delivered by companies reporting full-year annual results in August, economic data “has been relatively resilient, with re-acceleration in the US, falling unemployment and easing cost pressures” “In the least, downside scenarios are less likely, allowing for guidance upgrades overall.” UBS pointed also to slowing inflation, accelerating retail sales and higher wages. “Economic data over the last few months has shown that the Australian economy has not just avoided a recession, but is recording better data across a range of measures,” its analysts said. “With the September quarter now appearing to have been the low point of this cycle, we expect that the (first-half results) and the outlook statements, which companies will deliver through February, should begin to reflect the improved set of conditions that formed through the December quarter.” However, expectations are for modest profit growth at best for the December half-year because of the big drag from the mining majors, building into better growth in the second half. UBS is tipping just 0.2 per cent earnings growth across the ASX200 for the 2025 financial year. Last month, Macquarie forecast annual earnings to actually decline 1.8 per cent, but noted that was a significant improvement on its expectation of a 4.8 per cent fall after ASX200 annual meetings in late-2024. The profit outlook would be much better but for the mining sector, which has laboured under weaker commodity prices and persistent concerns about Chinese demand, despite a lower Australian dollar boosting revenue. Macquarie sees resources profits retreating another 14.6 per cent this financial year, though it adds that better Chinese uptake of Australian commodities would quickly improve the outlook. That leaves ASX200 healthcare companies, selected retailers such as Wesfarmers, banks, property trusts and tech firms carrying investor expectations into the interim reporting season. On Macquarie’s estimates, industrial companies outside of the banks and real estate trusts are projected to increase earnings 6 per cent this financial year, with those with international companies doing better because of the weaker Australian dollar. A key factor in the improving outlook as been the recovery in consumer confidence as cost-of-living pressures continue to ease. UBS said its quarterly sentiment survey taken in December was the strongest on record, showing that “the Aussie consumer has become noticeably more optimistic on their outlook”. “On spending, income, savings, financial outlook, likelihood to buy a home, and travel spending, the high income earners showed meaningfully more optimism, as they have become energised on the prospect of interest rates cuts from the Reserve Bank coming through over the next six months.”