Contents

Annual Financial Report

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’, ‘Group’, ‘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 Banking Corporation 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’harbour’ 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 business and operations, market conditions and 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’‘expect’, ‘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 thosethe plans, objectives, expectations, estimates and intentions 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 existThe factors 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 suchmay impact on 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 maintain or 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,us, 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

‘Financial Statements’ means our audited consolidated statements of financial position as at 30 September 2005 and 30 September 2004 and consolidated statements of financial performance, cash flows and changes in equity for each of the three years ended 30 September 2005, 2004 and 2003 together with accompanying notes which are included in this Annual Financial Report.

We publish our consolidated financial statementsFinancial 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$’ are to Australian dollars, references to ‘US$’, ‘USD’ or ‘US dollars’ are to United States 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 have been translated 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 translationtranslations of Australian dollars into US dollars have been made at the rate of A$1.00 = US$0.7244,0.7643, 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’‘Noon Buying Rate’) on 30 September 2004.2005.  Unless otherwise stated, the translation of Australian dollars into NZ dollars has been made at the rate of A$1.00 = NZ$1.0998 (2004 NZ$1.0685), being the closing spot exchange rate used in the Financial Statements.  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 20002001 to 2 November 2004.2005.

Our financial year ends on 30 September.  As used throughout this Annual Financial Report, the financial year ended 30 September 20042005 is referred to as 20042005 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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OtherGroup Treasury, Pacific Banking and Head Office

In addition to BTSS, our financial business segment results BTSS forms part ofdisclosed under ‘Other’, which also includes include 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 prescencepresence in the near Pacific, including Papua New Guinea and Fiji.

Property

We occupy premises primarily in Australia, and New Zealand and the Pacific Islands including 1,0651,056 branches (2004 1,065) as at 30 September 2004. Of premises we occupy, as2005.  As at 30 September 2004,2005, we owned approximately 3% of the premises we occupy 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 2004,2005, the carrying value of our directly owned premises and sites was $90$97 million.

Under our sale and leaseback programprogramme during the past three financial years, 4455 properties have been sold in Australia with total proceeds of $108 million$89 million.  The sale and 26 propertiesleaseback programme in New Zealand with total proceeds of $44 million.was completed in 2004.

Our great placeGreat Place project

On 7 March 2003, Westpacwe executed an agreement forto lease (74,00074,000 m² of office space)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’.Great Place’ project.  This project will result in the consolidation of our existing ten Sydney Central Business District offices into just two main locations, being our great placeOur 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 2006.2006 and 2007.  The initial 12 year lease commitment which is currently anticipated to commence on completion of the building in November 2006 is included in the lease commitment table in noteNote 32 to the financial statements.Financial Statements.

The Westpac Office Trust (the trust)(Trust) was established in March 2003 to acquire the site.  To fund the acquisition and construction of the office towers, the trustTrust raised $365 million from investors and has a committed term loan facility of $320 million.  The trustTrust 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 entityResponsible Entity of the trust.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, were recorded in the statement of financial position of the Group.  The assets were offeredsold to investors by initial public offering in Australia on 8 November14 December 2004.

SaleHastings Funds Management Limited (Hastings)

Pursuant to a deferred sale agreement, we are in the process of Australian Guarantee Corporation Limited (AGC)

On 31 May 2002, we sold our 100%completing the acquisition of the remaining 49% 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 inHastings not previously held by us.  It is anticipated that the second half ofcompletion process will conclude during the 2002 financial year.quarter ending 31 December 2005.

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 ManagementThis business for $323 million. These businesses havehas been integrated into our wealth management business unit.

Outsourcing contractscontracts(1)(1)

WestpacOn 4 February 2005, in conjunction with the National Australia Bank and Keycorp Payment Services (Keycorp)the Commonwealth Bank of Australia, we entered into a fivetwelve year outsourcing arrangement on 10 May 2004with Fiserv Solutions Australia Pty Limited 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)voucher (cheque) processing services.  As a result of this ‘utility’ style arrangement, our existing agreement with Unisys Payment Services Limited for cheque processing will be terminated progressively as services are transitioned to the EFTPoS terminals as well as all asset management functions. Keycorp is also responsible fornew provider.  We expect to incur costs of approximately $217 million in acquiring services from Fiserv under the supply and managementnew contract, over a period 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.approximately 12 years.

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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Taxation

We are currently disputing amended tax assessments and Notices of Proposed Adjustments received from the New Zealand Inland Revenue Department. Details are containedDepartment Investigation

The New Zealand Inland Revenue Department (NZIRD) is reviewing a number of structured finance transactions as part of its audit of the 1999 to 2002 tax years.  This is part of a broader NZIRD investigation and review of structured finance transactions in note 6the New Zealand market.

The transactions in question have been progressively run down and have now all been unwound.  Potential interest continues to accrue on the core tax if the NZIRD is successful in its challenge.

On 30 September 2004, we received assessments totalling NZ$18 million (A$16 million) (NZ$25 million (A$23 million) with interest) in respect of three transactions for the 1999 tax year.  On 31 March 2005, the NZIRD issued further amended tax assessments relating to the financial statements.2000 tax year that will impact three structured finance transactions in place in the 1999 tax year and an additional two structured finance transactions undertaken in the 2000 tax year only.  The maximum potential tax liability reassessed for the 2000 tax year is NZ$61 million (A$55 million) (NZ$85 million (A$77 million) with interest).  The potential primary tax in dispute for all five of these transactions for the years up to and including 30 September 2005 is NZ$220 million (A$200 million) (this includes the amounts noted above).  With interest this increases to NZ$296 million (A$269 million) (calculated to 30 September 2005).  The additional tax assessed in respect of the 1999 and 2000 tax years (NZ$79 million (A$72 million) tax plus interest as noted above) has been paid to the NZIRD as ‘tax in dispute’ to prevent further interest accruing.  This has been recorded in the Financial Statements as a receivable in ‘Other assets’ reflecting our position as noted below.

The NZIRD is also investigating other transactions undertaken by us, which have materially similar features to those for which assessments have been received.  Should the NZIRD take the same position across all of these transactions, for the years up to and including the year ended 30 September 2005, the overall primary tax in dispute will be approximately NZ$611 million (A$556 million) (including the amounts noted above).  With interest this increases to approximately NZ$750 million (A$682 million) (calculated to 30 September 2005).

We sought a binding ruling from the NZIRD on an initial transaction in 1999 which, following extensive review by the NZIRD, was confirmed in early 2001.  The principles underlying that ruling are applicable to, and have been followed in, all subsequent transactions.

At the time of entering the transactions, we received independent tax and legal opinions which confirmed that the transactions complied with New Zealand law.  Legal counsel has confirmed that the relevant parts of these opinions remain consistent with New Zealand law.

As previously disclosed, we are confident that the original tax treatment applied by us in all cases is correct.  We remain of the view that the transactions are legitimate and do not constitute tax avoidance.  Accordingly, no tax provision has been raised in respect of these matters.

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 and more actively managing their own financial servicesaffairs and, along with deregulation of the banking industry, are driving the demand for individually tailored and innovative products.  In addition,Corporate and institutional customers are more actively managing their own financial affairs.increasingly moving offshore to capture global growth opportunities.

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 industryAggressive entrants and smaller players are ableusing product focused strategies backed by strong customer service 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.

There are several implications arising out of these changing trends.  Financial services providers are under pressure to continually reduce costs, streamline customer facing processes, provide tailored and innovative products, and choose which activities they will own and which they will outsource.  Smaller lending originators and third party distributors continue to be 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 through selling the additional services and products that meet their financial needs.  Several leading domestic financial providers are also expanding their banking capability in Asia.

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.  We seek to deliver superior customer experience through:

•direct channels, such as telephone banking, internet banking, ATMs and Electronic Funds Transfer Point of Sale (‘EFTPoS’);

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

•maintaining profitable relationships with and provide superior value propositions to third party channels, including independent financial advisers, accountants and independent mortgage and business lending 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 by thoroughly understanding the needs of our customers, providing value-adding solutions, and building long-term relationships;

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

•having an outstanding leadership team supported by committed and high quality people that are enabled by superior processes and systems.

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Fixed remuneration is market aligned, and subject to either enterprise agreements and awards or annual review.  All our employees participate in short term incentive schemes, with specific reference to the role and to market competitiveness.  A range of short term incentive schemes has been designed in recognition of our business needs – from highly formulated incentive schemes for roles with a strong sales focus, to discretionary arrangements for roles such as corporate support, based on performance against individual and business objectives.

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 noteto Note 26 to the financial statements.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 noteto Note 33 to the financial statementsFinancial Statements for further information.

Awards of long term performance incentives are available to select employees regarded as business critical or high potential.

A highlight for 2005 was the implementation of superannuation (pension) choice for all our employees in eligible accumulation funds.  2006 is expected to see the introduction of an enhanced performance management framework, designed to more completely integrate our values of teamwork, integrity and achievement into remuneration outcomes.

The Board Remuneration Committee oversees the remuneration practices across our Group, and approves total expenditure for performance recognition.

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 regulatedan ADI we report prudential information 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 BasedBasel Committee on Banking Supervision.  Refer to the section ‘Basel Capital Accord’.

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 ASX operates Australia’s primary national market for securities issued by listed companies.  Our securities are listed on the ASX and we therefore have a contractual obligation to comply with the ASX Listing Rules, that have statutory backing in the Australian Corporations Act 2001.  Oversight of listed companies’ compliance with the ASX Listing Rules is shared between the ASX and ASIC.

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 that 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, whichthat administer of the unfair trading legislation of their jurisdictions.

The Australian government’s present policy is that mergers among the four major banks 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 acquisitionacquisitions of Australian banks are subject to approval by the government under the Australian Foreign AcquisitionAcquisitions and Takeovers Act 1975 of Australia.1975.

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 statementsFinancial Statements on a quarterly basis, which also incorporates director attestation on the bank’sBank’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 areIn December 2004, the Board announced that the key operations in regular contact withNew Zealand would be locally incorporated.  Westpac received agreement in principle from the Reserve Bank regardingon its proposed incorporation model on 27 October 2005 and is about to commence the application ofconsultation process for the legislation required to implement local incorporation.  Our current expectation is that this policy. We are currently discussing with the Governor of the Reserve Bank potential alternatives to local incorporation for our operations in New Zealand.process will be completed by 1 October 2006.

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 2004,2005, the carrying value of our New Zealand assets was greater than our New Zealand deposit liabilities.

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United States

Our New York branch is a federally licensed branch and, as such, is subject to supervision, examination and extensive regulation by the US 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)(‘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 theThe 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 prosecutereport 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 and 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 reviewReview

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 2005, 2004, 2003, 2002 2001  and 20002001 from our audited consolidated financial statementsFinancial Statements and related notes.  The financial statementsFinancial Statements were reported on by independent auditors PricewaterhouseCoopers for 2005, 2004 and 2003 and Messrs R. Chowdry and M.J. Codling for 2002 and 2001, and Messrs R.S. Lynn and R. Chowdry for 2000.2001.

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 prospectsprospects’ and our audited consolidated 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 statementsFinancial Statements are prepared in accordance with accounting principles and policies as summarised in noteNote 1 to the financial statements.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 noteNote 45 to the financial statements.Financial Statements.

Consolidated net income under US GAAP for the year ended 30 September 20042005 was A$2,813 million (2004 A$2,772 million, (20032003 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 andgoodwill amortisation, superannuation expenses, employee share option and share plan compensation.compensation, debt instruments and service fees.

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