Westpac’s King says borrowers can cope with Cup Day rate pain
Westpac boss Peter King says his borrowers are primed to withstand more interest rate tightening should persistently high inflation provoke the Reserve Bank to raise the cash rate on Cup Day.
Ahead of the central bank’s November meeting on Tuesday, where it is widely expected to lift rates for the 13th time in 19 months to 4.35 per cent, Mr King told The Australian Financial Review borrowers “could accommodate” higher interest rates if warranted. “They could withstand a few,” the CEO added.
Westpac CEO Peter King at the bank on Monday. “The risk is that interest rates stay higher for longer,” he said. Edwina Pickles
“I’m not saying it won’t be painless,” he said. “It will hurt consumer spending and probably affect business more than what we are seeing. But I think that the mortgage customer has been very resilient to date.”
Westpac reported a 26 per cent increase in net profit of $7.2 billion for the 2023 financial year and launched a $1.5 billion share buyback, despite deteriorating mortgage margins. Mr King said Australia is heading towards rates being “higher for longer” as a pipeline of super projects lifts demand for workers and raw materials.
“If you look at the domestic economy, there is big demand for infrastructure; there is big demand for the energy transition; there is demand for more housing; and we obviously have immigration,” he said.
“The risk is that interest rates stay higher for longer because we still have a lot of domestic demand to do things that are important in the economy.”
Two-thirds of Westpac customers are ahead on their mortgage repayments, and offset balances rose to $57 billion at the end of September, as more customers opted for variable rate loans, Mr King said.
Despite a growing consensus
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