Westpac, Australia’s second-largest mortgage lender, reported a flat annual profit of $6.8 billion for the year ending September 30, marking a 1% decline from the previous year. The bank’s cash profit, excluding one-off items, stood at $7 billion, with a full-year dividend of $1.54 per share. The results were announced on Monday, just ahead of an anticipated interest rate hike by the Reserve Bank of Australia (RBA), expected to raise the cash rate to 4.85%. This increase would add over $6,000 annually to payments on an average mortgage, according to the Australian Financial Review.
Westpac CEO Anthony Miller expressed confidence in the RBA’s strategy to combat inflation, noting that the central bank has already implemented four rate hikes this year with likely one or two more to come. Miller acknowledged the impact of rising interest rates and federal tax changes on the property market but emphasized that housing demand in Australia continues to outstrip supply. He also highlighted strong business investment as a positive sign for the broader economy.
Inflation remains a significant challenge, with headline inflation surging to 4.3% in the 12 months to September, well above the RBA’s target range of 2% to 3%. The RBA’s strategy involves squeezing household budgets to reduce spending and curb inflation. However, recent data shows that household spending has already stalled, indicating the pressure on consumers. Markets are pricing in an 82% chance of another interest rate hike when the RBA announces its decision on Tuesday, which coincides with Melbourne Cup day.