Westpac CEO's chilling message for Aussie borrowers

Westpac's chief executive Peter King has warned borrowers interest rates could stay higher than previously predicted.

The Reserve Bank of Australia cash rate is already at a 12-year high of 4.35 per cent.

But new inflation data for the March quarter has made economists rethink the prospect of rate cuts in late 2024 - and even the potential for a rate rise.

'While inflation has fallen, getting it down to target range is proving difficult globally and here in Australia,' he said on Monday.

'It is likely interest rates will stay higher for longer.'

Mr King said Westpac was also seeing more borrowers struggle to repay their mortgage, following 13 interest rates rises in 2022 and 2023 and the end of the low and middle-income tax offset in June 2022 that gave back up to $1,500 to 10million Australians earning up to $126,000.

'While we've seen an uptick in stress in our loan books, this is to be expected given the large increase in interest rates, high inflation and taxation,' he said.

'We remain appropriately provisioned and with a strong balance sheet, are in a good position to help customers.'

He made the prediction of rates staying high, on Monday, as Westpac revealed its half-year net profit of $3.342billion, for the first half of 2023-24, was 16 per cent weaker than the corresponding six-month period in 2023-23 - covering July to December.

Westpac is officially predicting a November rate cut, instead of a September easing, with borrowers having to wait longer for relief from the most aggressive pace of monetary policy tightening since 1989.

Chief economist Luci Ellis, a former Reserve Bank assistant governor, changed Westpac's prediction after new Australian Bureau of Statistics data, released on April 24, showed underlying measures of inflation in the year to March were still above 4 per cent - or at levels well above the RBA's 2 to 3 per cent target.

Headline inflation eased to 3.6 per cent, down from 4.1 per cent, but this consumer price index figure included volatile price items, including fruit and vegetables which were 0.2 per cent cheaper over the year.

Westpac has set aside $5.135billion for impairment provisions in March 2024, up from $4.923billion in March 2023.