Paul Xiradis: Bullish resources, cautious on the consumer and hunting for turnarounds

The Australian economy is treading a fine line. The situation isn’t dire just yet, but it could deteriorate rapidly over the coming months. That’s the view of Ausbil founder and equity market veteran Paul Xiradis, who argues that additional interest rate hikes from the Reserve Bank of Australia will push the domestic economy and consumers over the edge.

The next RBA Board Decision is scheduled for 28 and 29 September, with markets increasingly favouring a further 25 basis point increase in the official cash rate. Beyond that, futures markets see a peak in interest rates in mid-2027 of 5%, from the current official cash rate of 4.35%.

Xiradis says that while there are bright spots in the domestic economy such as resources, the weak domestic demand side of the Australian economy is concerning. External factors such as continuing conflict in Iran and the supply shock running through energy markets are placing further pressure on the economy. Additional rate hikes, he believes, would be very concerning and could cause the domestic economy to deteriorate quickly.

It's not dire, but the potential is that it could actually deteriorate, particularly if we have what some commentators are suggesting, we're going to have another two or three series of rate increases. We just don't think the consumer and the domestic economy can actually handle that and that's a concern.

Xiradis is an outlier on the rates picture and believes the RBA won’t hike later this month, but that hasn’t stopped him from positioning his portfolio away from companies that generate earnings form the domestic economy.

Against a sluggish backdrop, Xiradis said he has leaned heavily into the resources sector and companies with offshore earnings. In addition, he has selectively picked up turnaround stories where a disconnect has emerged between price and fundamentals.

In this in-depth interview, Xiradis shares his views on the precarious position facing the RBA and how he is positioning Ausbil’s portfolios. He also highlights a selection of management teams that he believes are steering their businesses to weather the difficult environment and capitalise on better days ahead.

Interview recorded on the 8th of September 2026

Resources strength to continue

Xiradis remains constructive on the commodity cycle, viewing current market strength as part of a structural shift that began in 2022. Geopolitical friction has exposed critical global supply shortfalls, fueling long-term demand for industrial resources.

He believes the factors supporting commodity prices, including energy security, AI-driven demand and defence spending, will endure and continue to support the current resources cycle.

To capture this, Ausbil is overweight resource giants BHP Group (ASX: BHP) and RIO Tinto (ASX: RIO). 

Down the market cap spectrum, Xiradis likes copper play Sandfire Resources (ASX: SFR), lithium producers Pilbara (ASX: PLS) and IGO (ASX: IGO), and highlights Mineral Resources (ASX: MIN) as a standout turnaround bought at $20.

Opportunities in corporate turnaround stories

Xiradis’s catch cry for investing is simple - earnings drive share prices. Ausbil's internal forecasts have earnings growth coming in the low teens for FY27, largely driven by resources. Finding bottom-up growth elsewhere requires targeting turnaround stories and mispriced incumbents.

Xiradis points to a selection of stocks that he believes have the right ingredients to deliver meaningful turnarounds.

• Treasury Wine Estates (ASX: TWE): Simplifying the business under new management and getting back to basics.
• Domino’s Pizza (ASX: DMP): Presenting attractive upside under new CEO Andrew Gregory following an operational reset.
• James Hardie Industries (ASX: JHX): Starting to realise benefits from the acquisition of US-based outdoor living products maker Azek. 

Healthcare is also emerging from the doghouse, led by CSL (ASX: CSL), where reset expectations have cleared the decks for growth.

“I think there's been a real clean-out of some past areas in the sense that, within the organisation, they've cleared the decks. I think there's a real focus on growing the business again to where it was and where it should be going forward. There's some good upside there.”

Meanwhile, in technology, AI concerns have weighed on local SaaS plays. Xiradis views AI as an opportunity for market leaders like REA Group (ASX: REA) to lower costs and enhance features.

With the jury still out on domestic SaaS and technology companies, Xiradis believes that investors will eventually recognise the value of market leadership in the sector.

“We think there are some opportunities there. The market hasn't fully appreciated it yet, and it hasn't been recognised in the same way it has in the US. So we've seen a strong bounce back in some of those leading SaaS companies, but we haven't seen it here as yet. We think only time will actually deliver.”

Cautious on companies exposed to domestic demand

The picture is far less forgiving for companies linked directly to domestic consumers. Ausbil is underweight discretionary retail and residential property, facing sticky inflation, weak productivity, rising unit wage costs, and shot consumer confidence.

Additional rate hikes would act as a severe handbrake on spending, and the slowdown in the domestic housing market is added cause for concern. Xiradis says there is a material flow-on effect, with a dollar spent in construction having a 2.9x multiplier effect. When that investment cycle slows, it creates a negative wealth effect.

“We're underweight discretionary retail, and we don't have a big exposure to property, as in residential, but there'll be a point in time when you should re-enter. We think the next period will still be a bit tough, particularly against the backdrop of rising rates or the talk of rising rates.”

A time to survive, not swing for the fences

Fresh off reporting season, I asked Xiradis to distil the key messages he took away from management meetings. The universal feedback was clear: conditions on the ground are tough, forcing management teams to focus on the operational levers within their control.

Rather than relying on top-line economic growth, corporate leaders are being pragmatic about the operating environment and focusing on getting through it.

One positive is that corporate Australia enters this period with strong balance sheets. Xiradis notes that net debt across the ASX 200 (excluding financials) is lower year on year. Whilst the operating environment may be tough, he says there are numerous high-quality management teams doing a good job of ensuring they are well placed for a turn in the cycle. 

"A lot of the companies that we've been speaking to understand there are challenges. They're looking a bit past that and saying how can we be better for it and make sure we get the recovery when it does occur."