The bank, which reported an 8 per cent fall in its operating profit but an improved bottom line result of $5.69 billion, said it was not witnessing increases in hardship or stressed assets.

“Many customers built up savings during the past two years and 68 per cent remain ahead on their mortgage repayments,” chief executive Peter King said.

“However, it is inevitable that the impact of higher rates will be felt, including when borrowers’ low, fixed-rate loans are rolled over.

“In Australia, consumer spending is resilient but as higher interest rates bite we expect the heat to come out of the economy and inflation pressure to ease.

“Small business is one sector we are watching closely as consumption slows.

“Housing prices have fallen in recent months and this will continue into 2023. Credit growth is expected to ease. GDP growth will slow and unemployment will rise.

“These are the necessary outcomes if we are to lower inflation.”

Westpac would pay a dividend of 64 cents a share fully franked.

King said he was pleased with the bank’s overall performance.

“Our year-on-year results are solid and over the past six months in particular we have demonstrated momentum with core earnings up 12 per cent and our net interest income up 7 per cent. Margins increased 5 basis points in the second half to 1.9 per cent, but they remain below historical levels,” King said.

Revenue for the bank was down 8 per cent $19.6 billion. Profit before tax was $8.47 billion compared with $8.5 billion in 2021.

The increased bottom line result of $5.69 billion was due to the reduction in expenses, offset by lower interest income from the loss of its insurance business and higher credit impairment charges.