Banks in Australia may be planning huge layoffs -- thousands across the board -- in response to spiraling funding costs and a dramatic slowdown in mortgage business.

According to a report in The Daily Telegraph newspaper, almost 60 percent of the money the big banks of Australia spend each year are eaten up by staff costs.

Greg Fraser, an analyst at Fat Prophets, told the paper: "All the banks are looking at low single-digit credit growth. They need to find another way to boost earnings growth and there are strong signals that further cost-cutting in labor costs will be the source of some profit growth this year."

By market cap, the Australian banking sector is dominated by four players: Commonwealth Bank, Westpac Banking Corp., Australia and New Zealand Banking Corp. (ANZ) and National Australia Bank.

The chief executive of Westpac Gail Kelly has already suggested significant number of jobs will be cut this year, although the company has made no formal announcement yet. Analysts estimate the bank will cut about 1600 jobs in the new year.

One analyst told the Telegraph that Commonwealth Bank would also likely slash its workforce. ANZ, which slashed 1,000 jobs four years ago, may also restructure its personnel.

Unions are outraged by the potential for impending job cuts, given that the banking industry recorded profits of $24.2 billion in 2011, an 11.5 percent jump from the prior year.

“In our experience whenever they mention the word costs all they do is focus on staff costs," said Finance Sector Union national secretary Leon Carter.

Carter added: "There is an added urgency this year because, unfortunately, despite the capacity to do so, none of them have come out and said 'we won't be sacking Australians in 2012'. Instead, what they let go is endless speculation that workers are going to lose their jobs."

Ironically, Australia largely avoided the 2008 financial global crisis (largely due to their lack of exposure to toxic U.S. subprime mortgages), but now, due largely to internal factors as well the growing Euro zone debt malaise, banks Down Under may too find themselves in a similar quagmire that could drastically refigure the industry.