"If not tomorrow then probably December" ... the Westpac chief executive Gail Kelly says official interest rates are still on the way down.

"If not tomorrow then probably December" ... the Westpac chief executive Gail Kelly says official interest rates are still on the way down. Photo: GLENN HUNT

Westpac chief Gail Kelly has said further cuts to official cash rates are needed to boost consumer and business confidence.

Mrs Kelly said a rate cut as early as Tuesday when the Reserve Bank board meets was a “lineball call”, with economists divided on the timing. But any cut was likely to happen within the next few months.

Her comments follow Westpac's delivery of a 5 per cent jump in cash profit to $6.6 billion for the year to September 30.

Westpac's headline profit of $5.97 billion was down 15 per cent on the same period last year. However, the previous year's result had been inflated by a one-off $1.11 billion tax credit as a result of a benefit from the merger with St George Bank.

“We'll have to wait and see what the Reserve Bank does tomorrow. Most economists are 50-50 on what might happen tomorrow,” Mrs Kelly told a briefing this morning.

“If not tomorrow then probably December. I think we're definitely in an environment where declining interest rates are the likely outcome.

“Certainly it would be very beneficial for consumer confidence and consumer sentiment to see rates come down.

“If not tomorrow the Reserve Bank might well take the view that it wants to wait and see the effects of the stimulus it has already put into the system. If not tomorrow probably December or the latest February."

Any cut by the central bank would likely bring interest rates back down to at least 3 per cent – the emergency cash rate setting last put in place in the depths of the global financial crisis.

Mrs Kelly declined to comment on whether her bank would pass on any official rate cut in full, saying that is a matter to be decided at the time.

She said banking remained challenging as it adapted to structural changes. Bad debt charges were expected to plateau around current levels over the next 12 months.

Mrs Kelly said consumers were still cautious about the amount of debt they held, which had dampened spending throughout the economy.

“I think that trend of saving more and paying down debt still has quite a way to play through," she said.