UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(MARK ONE)

For the transition period from                          to                          

Commission file number  1-10167

Westpac Banking Corporation

Australian Business Number  33 007 457 141

(Exact name of Registrant as specified in its charter)

New South Wales, Australia

(Jurisdiction of incorporation or organization)

60 Martin Place, Sydney, NSW 2000, Australia

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Ordinary shares, par value A$1.00, listed on the New York Stock Exchange not for trading, but only in connection with the registration of related American Depositary Shares, pursuant to the requirements of the New York Stock Exchange.

American Depositary Shares, each representing the right to receive five Ordinary shares, listed on the New York Stock Exchange.

Securities required to be registered pursuant to Section 12(g) of the Act

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act

4.625% Subordinated Notes Due 2018

Indicate the number of outstanding shares of each of the registrant’s classes of capital or common stock as of September 30, 2004.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days.

Yes         ý         No         o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17   o               Item 18   ý

Contents

In this Annual Financial Report references to ‘Westpac’, ‘we’, ‘us’ and ‘our’ are to Westpac Banking Corporation ABN 33 007 457 141. References to ‘Westpac’, ‘we’, ‘us’ and ‘our’ under the captions ‘Information on Westpac’, ‘Financial review’, ‘Corporate governance’, ‘Remuneration philosophy and practice’, ‘Shareholding information’, ‘Management’ and ‘Additional information’ include Westpac and its subsidiaries unless they clearly mean just Westpac Banking Corporation.

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Form 20-F cross-reference index

(for the purpose of filing with the United States Securities and Exchange Commission).

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Disclosure regarding forward-looking statements

This Annual Financial Report contains statements that constitute ‘forward-looking statements’ within the meaning of section 21E of the US Securities Exchange Act of 1934. The US Private Securities Litigation Reform Act of 1995 provides a ‘safe harbor’ for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as the information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information.

Forward-looking statements appear in a number of places in this Annual Financial Report and include statements regarding our intent, belief or current expectations with respect to our results of operations and financial condition, including, without limitation, future loan loss provisions and financial support to certain borrowers. We use words such as ‘may’, ‘except’, ‘intend’, ‘plan’, ‘estimate’, ‘anticipate’ ‘believe’, ‘probability’, ‘risk’, or other similar words to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Annual Financial Report as anticipated, believed, estimated, expected or intended.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. We caution readers that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements made by us or on our behalf. These factors include:

•                  inflation, interest rate, exchange rate, market and monetary fluctuations;

•                  the effect of, and changes in, laws, regulations, taxation or accounting standards or practices and government policy;

•                  changes in consumer spending, saving and borrowing habits in Australia, New Zealand and in other countries in which we conduct our operations;

•                  the effects of competition in the geographic and business areas in which we conduct operations;

•                  the ability to increase market share and control expenses;

•                  the timely development of and acceptance of new products and services and the perceived overall value of these products and services by users;

•                  technological changes;

•                  demographic changes and changes in political, social and economic conditions in any of the major markets in which we operate; and

•                  various other factors beyond our control.

The above list is not exhaustive. For certain other factors that may impact on forward-looking statements made by us in this report refer to the section on ‘Risk factors’ in this Annual Financial Report. Our forward-looking statements arenot guarantees of future performance and involve risks and uncertainties. Actual results may differ from those in the forward-looking statements as a result of various factors. When relying on forward-looking statements to make decisions with respect to Westpac, investors and others should carefully consider the foregoing factors and other uncertainties and events.

We are under no obligation, and do not intend, to update any forward-looking statements contained in this Annual Financial Report, whether as a result of new information, future events or otherwise after the date of this Annual Financial Report.

Currency of presentation, exchange rates and certain definitions

We publish our consolidated financial statements in Australian dollars. In this Annual Financial Report, unless otherwise stated or the context otherwise requires, references to ‘US$’, ‘USD’ OR ‘US dollars’ are to United States dollars, references to ‘dollar amounts’, ‘$’, ‘AUD’ or ‘A$’ are to Australian dollars and references to ‘NZ$’ or ‘NZD’ are to New Zealand dollars.  Solely for the convenience of the reader, translations of certain Australian dollar amounts into US dollars have been made at specified rates. These translations should not be construed as representations that the Australian dollar amounts actually represent such US dollar amounts or have been or could be converted into US dollars at the rate indicated. Unless otherwise stated, the translation of Australian dollars into US dollars have been made at the rate of A$1.00 = US$0.7244, the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the ‘noon buying rate’) on 30 September 2004. Refer to ‘Exchange rates’ for information regarding the rates of exchange between the Australian dollar and the US dollar from the financial year ended 30 September 2000 to 2 November 2004.

Our financial year ends on 30 September. As used throughout this Annual Financial Report, the financial year ended 30 September 2004 is referred to as 2004 and other financial years are referred to in a corresponding manner. 

‘Financial Statements’ means our audited consolidated statements of financial position as at 30 September 2004 and 30 September 2003 and consolidated statements of financial performance, cash flows and changes in equity for each of the three years ended 30 September 2004, 2003 and 2002 together with accompanying notes which are included in this Annual Financial Report. 

Any discrepancies between totals and sums of components in tables contained in this Annual Financial Report are due to rounding.

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Exchange rates

For each of the years indicated, the high, low, average and year end noon buying rates for Australian dollars were:

For each of the months indicated, the high and low noon buying rates for Australian dollars were:

(1)          Through to 2 November 2004. On 2 November 2004, the noon buying rate was A$1.00 = US$0.7447.

(2)          The average of the exchange rates on the last day of each month during the period.

(3)          The noon buying rate at such date may differ from the rate used in the preparation of our consolidated financial statements at such date. Refer note 1(a)iv to the financial statements.

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Information on Westpac

We are one of the four major banking organisations in Australia and also one of the largest banks in New Zealand. We provide a broad range of banking and financial services in these markets, including retail, commercial and institutional banking and wealth management activities.

We were founded in 1817 and were the first bank to be established in Australia. In 1850 we were incorporated as the Bank of New South Wales by an Act of the New South Wales Parliament. In 1982 we changed our name to Westpac Banking Corporation. On 23 August 2002, we were registered as a public company limited by shares under the Australian Corporations Act 2001. Our principal office is located at 60 Martin Place, Sydney, New South Wales, 2000, Australia and our telephone number is (61) (2) 9226-3311.

We have branches, affiliates and controlled entities throughout Australia, New Zealand and the Pacific region and maintain offices in some of the key financial centres around the world(1). As at 30 September 2004, our market capitalisation was $32 billion(2). Our operations comprise four key areas of business, through which we serve approximately 8.2 million customers. These four areas of business are:

•                  Business and Consumer Banking: providing retail banking and other financial services to individuals and small to medium-size businesses across Australia;

•                  BT Financial Group: providing investment management and administration, retirement planning, income protection and life insurance services that are designed to enable customers to build, manage and protect personal wealth;

•                  Westpac Institutional Bank: providing banking, financial and advisory services to corporate, institutional and government customers,  and also supplying financial products to small and medium-size businesses primarily in Australia and New Zealand; and

•                  New Zealand Banking: providing a full range of retail, commercial and other financial services to customers throughout New Zealand.

Business strategy

Our mission is to be the No. 1 service organisation in the financial services industry in Australia by September 2005.

We believe we will fulfill this mission and continue to be a great Australasian company by:

•                  providing our customers with a superior experience relative to our competitors;

•                  providing our staff with a great place to work;

•                  providing first quartile(3) returns to our shareholders; and

•                  being a good corporate citizen.

By improving employee commitment we can deliver a superior customer experience which drives sustainable shareholder value.

We intend to achieve our vision through the superior execution of our five strategic elements:

•                  high performance culture – committed high quality people who are enabled by superior processes and systems;

•                  superior customer experience – executing our ‘Ask Once’ promise, providing an open and honest interface and addressing the specific needs of customers;

•                  balancing risk and reward – optimising our risk/reward decisions throughout the business cycle;

•                  operational efficiency and infrastructure – strategic cost management and product and process simplification across the Group; and

•                  corporate reputation – sustaining our leading position(4).

We believe superior execution of our strategy at all points in the service-profit chain can differentiate us from our competitors.

The key to superior execution is a high performance culture supported by:

•                  quality people;

•                  effective people and performance management processes; and

•                  strong corporate values.

(1)          Refer note 38 to the financial statements for a list of our controlled entities as at 30 September 2004.

(2)          Our market capitalisation calculation is based on our Australian ordinary shares and our New Zealand Class shares.

(3)          Total shareholder returns (TSR) measured by Mellon Equity Solutions.

(4)          As measured by the Dow Jones Sustainability Index, Australian Corporate Responsibility Index and Global Governance Ratings.

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The following tables present, for each of our four key areas of business, the net profit attributable to equity holders and total assets at the end of the financial years ended 30 September 2004, 2003 and 2002. Refer note 29 to the financial statements for detailed financial disclosure of our geographic and business segments.

Net profit attributable to our equity holders(1), (2), (3)

Assets(2)

(1)          Internal charges and transfer pricing adjustments have been reflected in the net profit reported for each of our business groups.

(2)          Due to changes in our management reporting structure, or due to accounting reclassifications, comparatives have been restated and therefore, may differ from results previously reported.

(3)          Results for 2002 include a number of individually significant items which affect the comparability of results year on year. Refer ‘Financial review’ for a more detailed discussion of these items.

(4)          Other includes the results of Business and Technology Solutions and Services, Group Treasury, Pacific Banking and Head Office functions.

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Business and Consumer Banking

Our Business and Consumer Banking (BCB) unit represents the retail bank operations branded ‘Westpac’ across Australia.

BCB is responsible for servicing and product development for our consumer and small to medium-sized business customers within Australia. Activities are conducted via our nationwide network of branches (over 800 including in-store branches), call centres, automatic teller machines (ATMs) and e-channel banking services. Our front line staff provide sales and service-related functions to customers for a broad range of financial products, including savings and cheque accounts, demand and term deposits, credit cards, and personal and housing loans. A significant portion of our housing finance sales are through independent mortgage brokers. In the year ended 30 September 2004 approximately 26% (2003 28%) of mortgage loan drawdowns were arranged via this channel. We also employ approximately 500 financial planners and advisers who provide advice in respect of various superannuation, investment and life insurance products. Our business banking customers are additionally serviced by specialised relationship managers.

We are a significant lender in the housing finance market in Australia. In the year ended 30 September 2004, our owner-occupied residential mortgage loan portfolio in Australia increased 7% to $44.9 billion (net of securitised loans) with variable interest rate loans comprising 90%  of the portfolio. Non-owner-occupied residential mortgage loans increased 20% during the year ended 30 September 2004. As at 30 September 2004 these loans amounted to $44.5 billion of which approximately 84% constituted variable interest rate loans. In addition, we are a major provider of credit card finance in Australia. Our total net credit card outstandings as at 30 September 2004 increased by 13% to $4.9 billion  (2003 $4.4 billion).

We are a major lender in the business finance market in Australia. In the year ended 30 September 2004, our business finance portfolio increased by 15% to $35.8 billion with term lending increasing 12% to 36% of the portfolio, bill acceptances increasing 11% to 38% of the portfolio; and equipment finance increasing 38% to 19% of the portfolio. The balance of the portfolio comprised revolving cash management facilities. 3% of the equipment finance increase was due to the repurchase from Australian Guarantee Corporation (AGC) of a portfolio of assets under the sale agreement of AGC to General Electric Capital (GE) in 2002.

Our electronic channels area manages online banking facilities for our business, personal and private label customers. As at 30 September 2004, we had approximately 1.5 million online banking customers who conducted 87 million online transactions during the past financial year.

BT Financial Group Australia

BT Financial Group Australia (BTFG) represents our Australian wealth management business. BTFG designs, manufactures and services financial products that enable our customers to achieve their financial goals by accumulating, managing and protecting their personal wealth. These financial products include managed investments (mutual funds), personal and business superannuation (pensions), life insurance, income protection, discount securities broking, margin lending, client portfolio administration (wrap) platforms and portfolio management and administration of corporate superannuation. Distribution of BTFG products is conducted through our Australian and New Zealand banking distribution businesses and an extensive range of independent financial advisers.

Our retail and wholesale funds under management (FUM) and funds under administration (FUA) in Australia totals $60.8 billion as at  30 September 2004.

Net retail flows improved significantly over the year ended 30 September 2004. Based on market data compiled by ASSIRT(1), BTG’s net inflows totalled $418 million in 2004, compared to net outflows of $2.7 billion in 2003.

Our wrap product has $13.8 billion in FUA as at 30 September 2004.

Based on the most recent data published by DEXX&R(2) (June 2004), BTFG’s Corporate Superannuation was ranked number one in inflows and has over 15% of market share of net flows. In the 12 months to September 2004, Corporate Superannuation has grown from $2.7 billion to $3.5 billion in FUA.

BTFG has $1.8 billion in margin lending loans outstanding and $226 million in life insurance in-force premiums in Australia as at 30 September 2004. The most recent life insurance market share information, published by DEXX&R (March 2004), places us fourth in Australian new business with 10.3% market share.

(1)          ASSIRT Pty Limited is an Australia company that provides managed investment research and analysis.

(2)          DEXX&R is a provider of research and information services to the financial services industry.

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Westpac Institutional Bank

Our institutional bank services the financial needs of corporations, institutions and government customers that are based in, or have interests in, Australia and New Zealand. This is achieved through dedicated industry teams supported by specialised expertise in financial markets, capital markets, specialised capital and transactional banking. The products and services we offer include:

In the global financial markets, we primarily focus on Australian and New Zealand dollar-denominated financial products and risk management.

During 2004 we experienced increased activity with our key clients across the product areas. We also recorded significant growth in our specialised capital business unit, which focuses on new business prospects that deliver investment products to our investor customers.

Our institutional bank supports our customers through branches and subsidiaries located in Australia, New Zealand, New York, London and Asia.

New Zealand Banking

We have a long commitment to New Zealand, dating from 1861 when we commenced operating as the Bank of New South Wales. Over the past year we have implemented a growth strategy based on new product and customer offerings in the Youth and Wealth market segments, longer opening hours, more specialist customer-facing staff in consumer and business banking and an emphasis on competing on quality and customer service rather than price. As a result we have seen steadily improving customer(1) and staff(2) satisfaction levels and independent ratings of the quality of our lending products(3).

We are one of New Zealand’s largest banks providing a full range of retail banking products, wealth management and commercial banking services to customers. As at 30 September 2004, we had 4,917 staff, 196 branches and 470 ATMs operating throughout the country. We have approximately 1.4(4) million customers, approximately 405,000 of whom are registered users of our online banking service.

We are the third largest lender of housing finance in New Zealand(5). As at 30 September 2004, our mortgage loan portfolio was NZ$19.5 billion (2003 NZ$16.7 billion) including securitised loans of NZ$0.7 billion (2003 NZ$0.8 billion). In addition, we are a major provider of wealth management services, with NZ$2.4 billion (2003 NZ$3.4 billion) in FUM as at 30 September 2004.

Business and Technology Solutions and Services

Business and Technology Solutions and Services (BTSS) provides functional support to our business units and comprises the following areas:

Originations, Servicing, Chief Information Officer (CIO), Chief Technology Officer (CTO), Corporate Services, Group Property and Strategic Sourcing.

•                  Originations and Servicing perform back office processing and settlement services for banking products.

•                  Our technology group (CIO and CTO) defines our overall information technology (IT) architecture, supports and enhances software systems, and manages and implements major projects across our organisation.

•                  Corporate Services provides infrastructure support for cash management, fraud, physical security, business services, and records management.

•                  Group Property was established in 2003 to develop our new Sydney office site (refer ‘Our great place project’ section below) and to manage the existing property portfolio.

•                  Strategic Sourcing manages IT, telecommunications, mortgage, card and voucher processing outsourcing contracts that we have entered into with external providers. In addition, Strategic Sourcing manages other supplier relationships.

(1)          Based on AC Nielson report - Syndicated Financial Services – Consumer Finance Monitor Banking Toplines, Quarter September 2004.

(2)          Based on Westpac Staff Perspectives Survey (SPS) 2004.

(3)          Based on CANNEX 2004 survey of lending products (five stars in every category).

(4)          All customers, primary and secondary, with an active relationship (excludes channel only and potential relationships).

(5)          Based on June 2004 General Disclosure Statements filed with the Reserve Bank of New Zealand.

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Other

In our financial business segment results BTSS forms part of ‘Other’, which also includes Group Treasury, Pacific Banking and Head Office functions. Group Treasury operations are primarily focused on management of our interest rate risk and funding requirements. Pacific Banking comprises our prescence in the near Pacific, including Papua New Guinea and Fiji.

Property

We occupy premises primarily in Australia and New Zealand including 1,065 branches as at 30 September 2004. Of premises we occupy, as at 30 September 2004, we owned approximately 3% in Australia and none in New Zealand. The remainder of premises are held under commercial lease with terms generally averaging five years. As at 30 September 2004, the carrying value of our directly owned premises and sites was $90 million.

Under our sale and leaseback program during the past three financial years, 44 properties have been sold in Australia with total proceeds of $108 million and 26 properties in New Zealand with total proceeds of $44 million.

Our great place project

On 7 March 2003, Westpac executed an agreement for lease (74,000 m² of office space) with Leighton Properties Pty Limited in relation to new premises being developed at the northern end of Darling Harbour near King Street in Sydney, Australia. The new site is bounded by Kent, Erskine, Napoleon and Sussex streets. The project to fit out the building and relocate approximately 5,200 staff to the new site is called the ‘Our great place project’. This project will result in the consolidation offices into just two locations, being our great place and our existing office at 60 Martin Place.

Construction of the new premises is underway. It will consist of two office towers of 21 and 32 levels linked by a common foyer and will include two levels of retail space, a retail branch, childcare facilities, an urban park, and both tenant and public parking. We have signed a 12 year lease on the building with three six year options to extend. The completion of the building is expected in November 2006, with our employees progressively occupying the premises throughout 2006. The initial 12 year lease commitment is included in the lease commitment table in note 32 to the financial statements.

The Westpac Office Trust (the trust) was established in March 2003 to acquire the site. To fund the acquisition and construction of the office towers, the trust raised $365 million from investors and has a committed loan facility of $320 million. The trust has been admitted to the official list of the Australian Stock Exchange and its securities were first quoted on 7 August 2003. Westpac Funds Management Limited, a wholly owned subsidiary of Westpac, is the responsible entity of the trust.

Significant developments

Epic Rest Group (Epic)

On 2 June 2004, we acquired via a trust structure a 100% holding in a group of companies that own and operate three strategically placed natural gas transmission pipeline assets. As at 30 September 2004 these assets remained, valued at $712 million, in the statement of financial position of the Group. The assets were offered to investors by initial public offering on 8 November 2004.

Sale of Australian Guarantee Corporation Limited (AGC)

On 31 May 2002, we sold our 100% interest in AGC in Australia to GE. In addition we sold certain loan assets of Australian Guarantee Corporation (NZ) Limited to GE. This transaction resulted in a profit on sale of $754 million after tax and a reduction in total group assets of approximately $9.9 billion being recorded in the second half of the 2002 financial year.

Wealth management business acquisitions

On 31 October 2002, we acquired most of the business of BT Financial Group, for an initial payment of $900 million. An additional payment of up to $150 million may be paid, contingent upon exceeding certain performance hurdles in the future. The acquisition included the funds management operations in New Zealand. This acquisition was funded from our existing financing sources. On 1 June 2002, we acquired the Rothschild Australia Asset Management business for $323 million. These businesses have been integrated into our wealth management business unit.

Outsourcing contracts(1)

Westpac and Keycorp Payment Services (Keycorp) entered into a five year outsourcing arrangement on 10 May 2004 for Westpac Electronic Funds Transfer Point of Sale (EFTPoS) terminals in Australia. Keycorp assumed responsibility for fleet services (including the provision of support and maintenance) of the EFTPoS terminals as well as all asset management functions. Keycorp is also responsible for the supply and management of the EFTPoS terminals and the Terminal Operating System and the integration with a new Terminal Application Management system. Westpac retains control over the merchant base (including contractual terms, fees and direct contact by Keycorp) as well as the decision as to what software applications are to be loaded on the EFTPoS fleet.

Westpac sold the existing EFTPoS fleet to Keycorp for $26 million. Keycorp leases the EFTPoS terminals to Westpac merchant customers with Westpac acting as a collection agent on its behalf. This includes the existing terminals at the time of sale and the replacement terminals which Keycorp will make available during the life of the agreement, ensuring Westpac meets its regulatory obligations with regard to the standard of the terminals being made available to Westpac’s merchants. The estimated costs expected to be collected from merchants and paid to Keycorp by Westpac during the life of the agreement are approximately $100 million.

(1)          Details of other significant outsourcing arrangements entered into in prior years are disclosed in note 32 to the financial statements.

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Legal proceedings

We have contingent liabilities in respect of actual and potential claims and proceedings that have not been determined. An assessment of likely losses is made on a case-by-case basis for the purposes of the financial statements and specific provisions have been made where appropriate, as described in note 34 to the financial statements.

Our entities are defendants from time to time in legal proceedings arising from the conduct of our business.

We are one of 20 defendants named in proceedings concerning the Bell Group of companies. The proceedings are complex and are anticipated to continue for a further 18 months. It is not possible to estimate the potential impact, however, we believe that we have good prospects of success.

On 8 April 2003, we announced that we had brought to the attention of the New Zealand Securities Commission an apparent technical non-compliance by BT Funds Management Limited (BTFM) with New Zealand securities regulations. This involved predominantly the late filing by BTFM and BT Funds Management No 2 Limited (BTFM (No 2)) of documents required to be lodged with the New Zealand Registrar of Companies. We have subsequently identified some instances of non-filing. These technical non-compliances commenced prior to our acquisition of BTFM in October 2002. BTFM and BTFM (No 2) have filed proceedings in the High Court for relief from the consequences of technical non-compliance. We do not expect that there will be any material financial cost to us arising from these circumstances.

Taxation

We are currently disputing amended tax assessments and Notices of Proposed Adjustments received from the New Zealand Inland Revenue Department. Details are contained in note 6 to the financial statements.

We do not consider that the outcome of any other proceeding, either individually or in aggregate, is likely to have a material effect on our financial position.

Competition

The market for financial services in Australia has traditionally been highly concentrated among the four major banks. However, the industry has changed significantly over the last decade driven by several emerging trends.

Customers are increasingly knowledgeable about financial services and, along with deregulation of the banking industry, are driving the demand for individually tailored and innovative products. In addition, customers are more actively managing their own financial affairs.

The erosion of local and global barriers to entry, such as the decline in the requirement for a branch network, means that competition is increasing. Product specialists within the industry are able to compete for and attract high-value customers with aggressive acquisition strategies across all product groups.

Advances in technology are reducing service delivery costs and improving customer convenience. Technology improvements are reducing the need for ownership and control of all of the activities required to provide a financial service or product.

There are several implications arising out of these changing trends. Financial services providers are under pressure to continually reduce costs,  the complexity of customer facing processes and to choose which activities they will own and which they will outsource. Mortgage originators and other third party distributors have continued as a competitive threat to the branch networks of the major banks. Growth opportunities are shifting from lending to investments and advice and from new customers to increasing the value of our existing customer relationships by maximizing their spend per product and share of wallet.

We have reacted to these emerging competitive pressures in several ways. Our distribution network has diversified from the simple branch focused model of the past into a diversified mix of distribution channels incorporating:

A superior customer experience through:

•                  direct channels, such as telephone banking, internet banking, ATMs and EFTPoS;

•                  face-to-face channels, such as metropolitan and rural banking branches, relationship managers (for business banking, private banking and high-value customers), financial planners and advisers and mortgage-lending representatives; and

Maintaining profitable relationships with and providing superior value propositions to:

•                  third party channels, including independent financial advisers, accountants and independent mortgage brokers.

As described in our strategy we believe we can address the above competitive pressures through:

•                  providing superior customer service relative to our major competitors, an open and honest interface and meeting the financial advice and coordination needs of our customers;

•                  continually focusing on the excellence and operational efficiency of our back office and service processes across the Group; and

•                  having committed and high quality people that are enabled by superior processes and systems.

In New Zealand we face competition principally from the locally incorporated subsidiaries of the other three major Australian banks. Most recently, Australia and New Zealand Banking Group Limited completed its acquisition of The National Bank of New Zealand Limited in December 2003. This has significantly changed the banking landscape making the merged entity the largest bank in New Zealand. In addition, there is competition from a number of smaller market participants that focus primarily on the retail and housing sectors.

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Economic outlook

Economic conditions in our key markets of Australia, New Zealand and the near Pacific have assisted strong earnings growth over the year.

In Australia, the economy has been strong, with unemployment at 20 year lows, solid company and consumer income growth and relatively stable interest rates. These factors have contributed to strong business and consumer sentiment and an environment supportive of solid credit growth and positive equity markets. Over the year, credit growth has remained high with an easing in household lending partially offset by stronger business credit.

The asset quality environment has also remained benign with few corporate defaults recorded over the year and strong household and business balance sheets.

The New Zealand economy has similarly performed well with private sector credit increasing by 14.1% and business credit growing 11.3% over the year. That said, tighter monetary conditions are expected to see economic growth moderate in the year ahead although remaining positive.

Looking ahead, macro economic growth and credit growth are expected to slow in 2005.

For the economy, the strong growth in consumer demand experienced over recent years is expected to return to more normal levels and we expect to see an improvement in the external accounts.

For credit growth, we expect the strong growth in housing lending to continue to slow, however offsetting this, we expect to see continued strength in business loan growth.

In summary, we believe both economic and credit growth will be supportive of growth in 2005, however increased price-based competition, lower household sector activity and emerging inflationary pressures indicate sector growth will be lower in 2005 relative to 2004.

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Employees

(1)          The number of employees includes core and implied full time equivalent (FTE) staff.  Core FTE includes overtime and pro-rata part time staff.  Implied FTE includes staff on unpaid absences (e.g. maternity leave), temporary and contract staff.

Total full time equivalent (FTE) employees increased 233 to 27,013 during the year. This reflects an increase in permanent FTE (670) partially offset by a reduction in temporary FTE (437).

The increase in permanent FTE includes:

•                  176 related to Epic which was acquired in June 2004;

•                  128 related to the in-sourcing of the Broker Processing Unit from our mortgage service provider, EDS; and

•                  23 related to the in-sourcing of back office accounting functions supporting our funds management business.

Of the remaining increase in permanent FTE, 100 relate to additional customer facing staff in New Zealand and 350 in Australia.

This increase was partially offset by a reduction in permanent FTE following a restructure of our internal technology operations, a reduction in call centre staff following the completion of call centre consolidation and continued efficiencies from improved work practices.

The reduction in temporary FTE is due to fewer temporary staff following the completion of BTFG integration and the ongoing benefit of synergies and the restructure of our internal technology operations.

Our Australian Enterprise Agreements were certified by the Australian Industrial Relations Commission (AIRC) on 2 August 2002.

While the nominal term of these agreements expired on 30 June 2004, they remain in force until they are replaced or terminated by the AIRC. We are currently negotiating new agreements with the Finance Sector Union (FSU) which include 4% pay increases for relevant employees in October 2004, 2005 and 2006. Although we have not settled new agreements we have paid eligible employees a 4% increase effective October 2004. In New Zealand, we maintain both individual and collective employment agreements with employees, negotiating annual collective employment agreements with the Finance and Information Union (Finsec). We continue to maintain a business-like and professional relationship with the FSU in Australia and Finsec in New Zealand.

We offer employee share plans for permanent employees in Australia and New Zealand, which are designed to provide tangible recognition for improvements in our performance and gain greater staff commitment. For further details refer note 26 to the financial statements. We also provide superannuation (pension) plans for our employees in Australia, New Zealand and certain other countries in which we operate. Plan members are entitled to benefits on retirement, resignation, permanent disability or death. Refer note 33 to the financial statements for further information.

Supervision and regulation

Australia

Within Australia we are subject to supervision and regulation by five principal agencies: the Australian Prudential Regulation Authority (APRA); the Reserve Bank of Australia (RBA); the Australian Securities and Investments Commission (ASIC); the Australian Stock Exchange (ASX);  and the Australian Competition and Consumer Commission (ACCC).

APRA is responsible for the prudential supervision of Authorised Deposit-taking Institutions (ADIs), life and general insurance companies and superannuation (pension) funds. One of its roles is to protect the interests of depositors and insurance policyholders.

As a regulated ADI we report to APRA prudential information in relation to capital adequacy, large exposures, credit quality and liquidity. Our controlled entities in Australia involved in general insurance, superannuation and life insurance are also subject to the regulatory regime of APRA. Reporting is supplemented by consultations, on-site inspections and targeted reviews. Our external auditors also have an obligation to report on compliance with certain statutory and regulatory banking requirements, and on any matters that in their opinion may have the potential to materially prejudice the interests of depositors.

Australia’s risk-based capital adequacy guidelines are generally consistent with the approach agreed upon by the Based Committee on Banking Supervision.

The RBA is responsible for monetary policy, maintaining financial system stability and payments system regulation. The RBA is an active participant in the financial markets, manages Australia’s foreign reserves issues Australian currency notes and serves as banker to the Commonwealth Government. On 1 July 2002, the RBA transferred the responsibility for registration and categorisation of financial corporations to APRA.

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ASIC is the sole national regulator of Australian companies. Its primary responsibility is for regulation and enforcement of company and financial services laws that protect consumers, investors and creditors. With respect to financial services, it promotes honesty and fairness through the provision of consumer protection, using as necessary its regulatory powers to enforce laws relating to deposit-taking activities, general insurance, life insurance, superannuation, retirement savings accounts, securities (such as shares, debentures and managed investments) and futures contracts.

The ACCC is an independent statutory authority responsible for the regulation and prohibition of anti-competitive and unfair market practices and mergers and acquisitions by Australian corporations. Its objectives are to ensure corporations do not act in a way that may have the effect of eliminating or reducing competition, and to oversee product safety and liability issues, pricing practices and third party access to facilities of national significance. The ACCC’s consumer protection work complements that of State and Territory consumer affairs agencies, which administer of the unfair trading legislation of their jurisdictions.

The Australian government’s present policy is that mergers among the four major will not be permitted until the government is satisfied banks will that competition from new and established participants in the financial industry, particularly in respect of small business lending, has increased sufficiently. Proposals for foreign acquisition of Australian banks are subject to approval by the government under the Foreign Acquisition and Takeovers Act 1975 of Australia.

New Zealand

The Reserve Bank of New Zealand (RBNZ) is responsible for the supervision of the New Zealand banking industry. This is primarily achieved through the extensive disclosure regime that was introduced in 1995 requiring all banks to publish financial statements on a quarterly basis, which also incorporates director attestation on the bank’s risk management disciplines. The RBNZ’s capital adequacy guidelines are in line with the Basel Committee guidelines.

The RBNZ policy is that all systemically important banks must incorporate as a local entity rather than operate via a branch. We are in regular contact with the Reserve Bank regarding the application of this policy. We are currently discussing with the Governor of the Reserve Bank potential alternatives to local incorporation for our operations in New Zealand.

The Banking Act 1959 (Australia) gives priority over our Australian assets to Australian depositors. Accordingly, other unsecured creditors including our non-Australian depositors will rank after our Australian depositors in relation to claims against our Australian assets.

However, the Westpac Banking Corporation Act 1982 (New Zealand) gives New Zealand depositors priority over our New Zealand assets. Accordingly, New Zealand depositors will rank ahead of our other unsecured creditors in respect of claims against our New Zealand assets.  Based on the audited statement of financial position as at 30 September 2004, the carrying value of our New Zealand assets was greater than our New Zealand deposit liabilities.

United States

Our New York branch is a federally licensed branch and as such is subject to supervision, examination and extensive regulation by the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System (the US Federal Reserve) under the International Banking Act of 1978 (the IBA), and related regulations. Under the IBA, we may not open any branch, agency or representative office in the US or acquire more than 5% of the voting stock of any US bank without the prior approval of the US Federal Reserve.

A federal branch must maintain, with a US Federal Reserve member bank, a capital equivalency deposit as prescribed by the US Comptroller of the Currency in an amount which is the greater of: (1) the amount of capital that would be required of a national bank organised at the same location; or (2) 5% of the total liabilities (excluding, among other things, liabilities to affiliates and liabilities of any international banking facilities) of the federal branch. In addition, a federal branch is examined by the US Comptroller of the Currency at least once each calendar year and periodically by the US Federal Reserve. The examination covers risk management, operations, credit and asset quality and compliance with the record-keeping and reporting requirements that apply to national banks, including the maintenance of its accounts and records separate from those of the foreign bank and any additional requirements prescribed by the US Comptroller of the Currency.

A federal branch of a foreign bank is, by virtue of the IBA, subject to the receivership powers exercisable by the US Comptroller of the Currency.

At this time we have not elected to become and therefore we are not a financial holding company as defined in the Gramm-Leach-Bliley Act of 1999.

USA PATRIOT Act

On 26 October 2001, the United States adopted the USA PATRIOT Act in response to the events of 11 September 2001. The Act requires US financial institutions, including the US branches of foreign banks, to take certain steps to prevent, detect and prosecute individuals and entities involved in international money laundering and the financing of terrorism. The required actions include verifying the identity of financial institutions, terminating correspondent accounts for foreign ‘shell banks’ and obtaining information about the owners of foreign bank clients the identity of the foreign bank’s agent for service of process in the US. Many of the new anti-money laundering compliance requirements of the USA PATRIOT Act are consistent with the anti-money laundering compliance obligations previously imposed on US financial institutions, including the US branches of foreign banks, under the Bank Secrecy Act and under regulations of the applicable US bank regulatory agency such as the US Comptroller of the Currency. These include requirements to adopt and implement an effective anti-money laundering program, report suspicious transactions or activities, and implement due diligence procedures for correspondent and other customer accounts. The passage of the USA PATRIOT Act and other recent events have resulted in heightened scrutiny of Bank Secrecy Act and anti-money laundering compliance programs by federal bank regulatory and law enforcement authorities.

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Financial review

Key information

Selected consolidated financial and operating data

We have derived the following selected financial information as of and for the financial years ended 30 September 2004, 2003, 2002, 2001  and 2000 from our audited consolidated financial statements and related notes. The financial statements were reported on by independent auditors PricewaterhouseCoopers for 2004 and 2003, Messrs R. Chowdry and M.J. Codling for 2002 and 2001, and Messrs R.S. Lynn and R. Chowdry for 2000.

PricewaterhouseCoopers was appointed our auditor at our annual general meeting on 12 December 2002 in accordance with the requirements of the Corporations Act 2001. In previous years the appointment of our auditors was determined in accordance with our Deed of Settlement.  Since 23 August 2002, the date on which Westpac Banking Corporation was registered as a public company limited by shares under the Corporations Act 2001, the Deed of Settlement ceased to apply.

This information should be read together with the ‘Operating and financial review and prospects financial statements and the accompanying notes.

Consolidated statement of financial performance

Refer page 16 for footnote explanations.

Differences between Australian and US Generally Accepted Accounting Principles (GAAP) results

Our consolidated financial statements are prepared in accordance with accounting principles and policies as summarised in note 1 to the financial statements. These accounting principles and policies differ in some respects from US GAAP. A reconciliation of net income, total assets, total liabilities and equity under US GAAP is included in note 45 to the financial statements.

Consolidated net income under US GAAP for the year ended 30 September 2004 was A$2,772 million (2003 A$1,984 million, 2002

A$2,579 million). The significant adjustments between Australian and US GAAP results primarily relate to goodwill amortisation, premises and sites, other debt instruments and employee share option and share plan compensation.

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Consolidated statement of financial position data

Refer page 16 for footnote explanations

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Summary of consolidated ratios