SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 6-K

REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934

11 September 2006

Australia and New Zealand Banking Group Limited

ACN 005 357 522

(Translation of registrant’s name into English)

Level 6, 100 Queen Street Melbourne Victoria 3000 Australia

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F: ü Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes No: ü

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

This Report on Form 6-K shall be deemed to be incorporated by reference in the prospectus included in the Registration Statement on Form F-3 (No. 333 - 113524) of Australia and New Zealand Banking Group Limited and to be part thereof from the date on which this Report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

This Form 6-K may contain certain forward-looking statements, including statements regarding (i) economic and financial forecasts, (ii) anticipated implementation of certain control systems and programs, (iii) the expected outcomes of legal proceedings and (iv) strategic priorities. Such forward- looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and which may cause actual results to differ materially from those expressed in the forward-looking statement contained in these forward- looking statements. For example, these forward-looking statements may be affected by movements in exchange rates and interest rates, general economic conditions, our ability to acquire or develop necessary technology, our ability to attract and retain qualified personnel, government regulation, the competitive environment and political and regulatory policies. There can be no assurance that actual outcomes will not differ materially from the forward-looking statements contained in the Form 6-K.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Australia and New Zealand Banking Group Limited


		(Registrant)

		By:	/s/ John Priestley
			Company Secretary
			(Signature)*

Date: 11 September 2006

* Print the name and title of the signing officer under his signature.

Australia and New Zealand
Banking Group Limited

ABN 11 005 357 522

Consolidated Financial Report

Half Year
31 March 2006

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

ABN 11 005 357 522

CONSOLIDATED FINANCIAL REPORT
Half year ended 31 March 2006

CONTENTS		*PAGE*

HIGHLIGHTS		1

FINANCIAL HIGHLIGHTS		2
Net Profit		2
Profit on a fully comparable AIFRS basis		2
Cash profit		2
Earnings per share		3
Balance Sheet		3
Financial Ratios		4
Net profit by business unit		6

CHIEF FINANCIAL OFFICER’S REVIEW		8
March 2006 half year compared to September 2005 half year		8
March 2006 half year compared to March 2005 half year		10
Cash profit / non core items		11
AIFRS 2005 adjustments		11
Summary of major AIFRS impacts		12
Reconciliation of Net Profit to Cash Profit		14
Income and expenses		15
Earnings per share		22
Dividends		23
EVA Reconciliation		23
Credit Risk		25
Market Risk		28
Balance Sheet		29
Capital Management		31
ANZ National Bank - Integration		33
ING Australia performance		34
ING New Zealand joint venture		36
Deferred acquisition costs and deferred income		36
Software capitalisation		37

BUSINESS PERFORMANCE REVIEW		38

GEOGRAPHIC SEGMENT PERFORMANCE		51

FOUR YEAR SUMMARY BY HALF YEAR		52

CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS		55

DEFINITIONS		124

ALPHABETICAL INDEX		126

This Results Announcement has been prepared for Australia and New Zealand Banking Group Limited (the “Company”) together with its subsidiaries which are variously described as “ANZ”, “Group”, “ANZ Group”, “us”, “we” or “our”.

All amounts are in Australian dollars unless otherwise stated. The Company has a formally constituted Executive Committee of the Board of Directors. This report was approved by resolution of a Committee of the Board of Directors on 11 September 2006.

When used in this Results Announcement the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to ANZ and its management, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Such statements constitute “forward-looking statements” for the purposes of the United States Private Securities Litigation Reform Act of 1995. ANZ does not undertake any obligation to publicly release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

HIGHLIGHTS

ANZ interim profit $1,811 million

All figures compared to March 2005 half year unless otherwise indicated

Profit after tax
·	Statuatory profit $1,811 million	up 16%
·	*Cash profit $1,731 million**	up 10%
·	*Cash profit before provisions**	up 10%

Earnings per share

EPS 98.4 cents

up 18%

Cash* EPS 94.0 cents 1

up 10%

Dividend

Interim dividend 56 cents

up 10%

Ratios

Return on equity 20.9% (18.3%)

Adjusted common equity ratio stable at 5.0% 2

Business comment
·	Earnings increased 16% in Personal Banking, record lead in customer satisfaction
·	Earnings increased 14% in New Zealand and Institutional
·	Continued frontline investment with 1,231 additional FTE
·	Provision for credit impairment at cyclical low
·	Growth and Transformation program on track
	*- Revenue growth 8%**	(target range 7% - 9%)
	- *Cost-Income ratio 45.8%**	(1.0% improvement)

*	Adjusted for AIFRS 2005 adjustments and non-core items (including significant items, ANZ National Bank incremental integration costs and AIFRS mark to market of certain hedge gains/losses). Refer pages 13 and 14 of enclosed report for a detailed reconciliation of GAAP figures to non GAAP cash figures. Refer page 11 for a discussion of why management believe measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations.
1.	Refer page 22
2.	Adjusted common equity is calculated as Tier 1 capital less preference shares at current rates and deductions from total capital. This measure is commonly used to assess the adequacy of common equity held. Refer page 31 for a reconciliation to Tier 1 capital

FINANCIAL HIGHLIGHTS

Net Profit

	Half year Mar 06 $M	Half year Sep 05 $M	Half year Mar 05 $M	Movt Mar 06 v. Sep 05 %	Movt Mar 06 v. Mar 05 %
Net interest income	3,368	2,953	2,865	14%	18%
Other operating income	1,595	1,861	1,717	-14%	-7%
Operating income	4,963	4,814	4,582	3%	8%
Operating expenses	(2,185)	(2,266)	(2,152)	-4%	2%
Profit before credit impairment and income tax	2,778	2,548	2,430	9%	14%
Provision for credit impairment	(224)	(296)	(284)	-24%	-21%
Profit before income tax	2,554	2,252	2,146	13%	19%
Income tax expense	(742)	(630)	(590)	18%	26%
Minority interest	(1)	(2)	(1)	-50%	0%
Net profit attributable to shareholders of the Company	1,811	1,620	1,555	12%	16%

Profit on a fully comparable AIFRS basis

Net profit attributable to shareholders of the company has been amended as follows to arrive at profit on a fully comparable AIFRS basis.

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Net profit attributable to shareholders of the Company	1,811	1,620	1,555	12%	16%
AIFRS adjustments to bring prior periods onto a fully comparable basis1	N/A	(46)	15	n/a	n/a
Profit on a fully comparable AIFRS basis1,5	1,811	1,574	1,570	15%	15%

Cash profit

Profit on a fully comparable AIFRS basis has been adjusted to exclude the following non-core items to arrive at cash profit. Throughout this document figures and ratios that are calculated on a ‘cash’ basis have been shaded to distinguish them from figures calculated on a statutory AIFRS basis.

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Profit on a fully comparable AIFRS basis1	1,811	1,574	1,570	15%	15%
Non-core items
Significant items2
Gain on sale of NBNZ Life	-	14	-	n/a	n/a
Settlement of NBNZ warranty claims	14	-	-	n/a	n/a
Settlement of NHB insurance claim	79	-	-	n/a	n/a
Total significant items2	93	14	-	large	n/a
Fair value hedge gains/losses3	13	12	19	8%	-32%
NBNZ incremental integration costs after tax2,4	(26)	(35)	(17)	-26%	53%
Total non-core items	80	(9)	2	large	large
Cash profit6,7	1,731	1,583	1,568	9%	10%

1.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer pages 11 to 14), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability
2.	In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the National Housing Bank (NHB) insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11)
3.	In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges, ineffective portions of cash flow hedges, profit or loss on disposal of investment securities, and fair value movement in bonds and notes designated at fair value as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $5 million; Mar 2005: $8 million))
4.	In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)
5.	Refer page 13 for a reconciliation of Profit on a fully comparable AIFRS basis to Net Profit
6.	Refer page 14 for a reconciliation of Cash Profit to Net Profit
7.	Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

FINANCIAL HIGHLIGHTS (continued)

Cash profit, cont’d

Analysis of Cash1 profit by key line item:

	Half	Half	Half	Movt	Movt
	year Mar 06 $M	year Sep 05 $M	year Mar 05 $M	Mar 06 v. Sep 05 %	Mar 06 v. Mar 05 %
Net interest income	3,368	3,231	3,140	4%	7%
Other operating income	1,563	1,528	1,407	2%	11%
Operating income	4,931	4,759	4,547	4%	8%
Operating expenses	(2,259)	(2,213)	(2,127)	2%	6%
Profit before credit impairment and income tax	2,672	2,546	2,420	5%	10%
Provision for credit impairment	(224)	(325)	(240)	-31%	-7%
Profit before income tax	2,448	2,221	2,180	10%	12%
Income tax expense	(716)	(636)	(611)	13%	17%
Minority interest	(1)	(2)	(1)	-50%	0%
Cash1 profit2,3	1,731	1,583	1,568	9%	10%

Earnings per share

	Half year Mar 06	Half year Sep 05	Half year Mar 05	Movt Mar 06 v. Sep 05 %	Movt Mar 06 v. Mar 05 %
Earnings per ordinary share (cents)
Basic	98.4	86.3	83.2	14%	18%
Diluted	96.1	84.3	80.6	14%	19%
Cash1 (basic adjusted for non-core items)3,4	94.0	86.1	85.7	9%	10%

1.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer pages 11 to 14), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability
	In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the NHB insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11)
	In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges, ineffective portions of cash flow hedges, profit or loss on disposal of investment securities, and fair value movement in bonds and notes designated at fair value as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $5 million; Mar 2005: $8 million))
	In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)
2.	Refer page 14 for a reconciliation to Net Profit
3.	Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations
4.	Refer page 22

Balance Sheet

	As at Mar 06 $M	As at Sep 05 $M	As at Mar 05 $M	Movt Mar 06 v. Sep 05 %	Movt Mar 06 v. Mar 05 %
Assets
Liquid assets	13,870	11,601	8,856	20%	57%
Due from other financial institutions	8,336	6,348	6,428	31%	30%
Trading and available for sale assets	22,008	16,327	15,694	35%	40%
Net loans and advances including acceptances	255,238	245,939	233,316	4%	9%
Other	19,911	17,889	18,490	11%	8%
Total assets	319,363	298,104	282,784	7%	13%
Liabilities
Due to other financial institutions	13,345	12,027	10,056	11%	33%
Deposits and other borrowings	196,850	190,322	185,177	3%	6%
Liability for acceptances	13,692	13,449	12,922	2%	6%
Bonds and notes	46,923	39,073	32,321	20%	45%
Other	29,757	23,695	23,381	26%	27%
Total liabilities	300,567	278,566	263,857	8%	14%
Total shareholders’equity	18,796	19,538	18,927	-4%	-1%

FINANCIAL HIGHLIGHTS (continued)

Financial Ratios

	Half	Half	Half
	year	year	year
	Mar 06	Sep 05	Mar 05
	$M	$M	$M

Net profit attributable to shareholders of the Company	1,811	1,620	1,555
Cash1 profit	1,731	1,583	1,568
EVA TM 2	1,013	991	920
Profitability ratios
Return on:
Average ordinary shareholders’ equity3,4	20.9%	18.3%	18.3%
Average ordinary shareholders’ equity3,4 (cash1 earnings basis)	20.0%	19.0%	19.0%
Average assets	1.15%	1.10%	1.14%
Average risk weighted assets4	1.60%	1.50%	1.54%
Average risk weighted assets4 (cash1 earnings basis)	1.53%	1.47%	1.55%
Total income4	14.5%	14.1%	15.0%
Net interest margin	2.29%	2.26%	2.36%
Net interest margin (cash1 earnings basis)	2.29%	2.36%	2.46%
Profit per average FTE ($)	58,202	53,097	53,161
Efficiency ratios
Operating expenses to operating income	44.0%	47.1%	47.0%
Operating expenses to average assets	1.39%	1.54%	1.57%
Operating expenses to operating income (cash1 earnings basis)	45.8%	46.5%	46.8%
Operating expenses to average assets (cash1 earnings basis)	1.44%	1.50%	1.55%
Credit impairment provisioning
Collective/general provision charge ($M)	36	90	133
Individual/specific provision charge ($M)	188	206	151
Total provision charge ($M)	224	296	284
Total provision charge (on fully comparable AIFRS basis)	224	325	240
Collective provision charge (fully comparable AIFRS basis)	36	119	89
Individual provision charge (fully comparable AIFRS basis)	188	206	151
Ordinary share dividends (cents)
Interim - 100% franked (Mar 05: 100% franked)	56	n/a	51
Final - 100% franked	N/A	59	n/a
Ordinary share dividend payout ratio5	56.9%	68.4%	61.3%
Cash1 ordinary share dividend payout ratio5	59.6%	68.6%	59.5%
Preference share dividend
Dividend paid ($M)6	12	46	38
Dividend paid ($M)7 (on fully comparable AIFRS basis)	12	12	6

1.	Adjusted for AIFRS 2005 adjustments and non-core items. Refer footnote 1 page 3. Refer pages 13 and 14 of enclosed report for a detailed reconciliation of GAAP figures to non GAAP cash figures. Refer page 11 for a discussion of why management believe measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations.
2.	EVATM refers to Economic Value Added, a measure of shareholder value. See page 23 for a reconciliation of EVATM to reported net profit and a discussion of EVATM and an explanation of its usefulness as a performance measure
3.	Average ordinary shareholders’ equity excludes minority interest
4.	Excludes preference share dividend
5.	Dividend payout ratio is calculated using the proposed interim dividend as at 31 March 2006 and the 30 September 2005 and 31 March 2005 dividends
6.	2005 includes distributions on ANZ StEPS (Sep 2005: $34 million; Mar 2005: $32 million). Under AIFRS, distributions on ANZ StEPS are reported as interest expense in March 2006
7.	Represents dividends paid on Euro Hybrid

FINANCIAL HIGHLIGHTS (continued)

Financial Ratios, cont’d

	As at	As at	As at	Movt	Movt
	Mar 06	Sep 05	Mar 05	Mar 06	Mar 06
				v. Sep	v. Mar
				05	05
				%	%
Net Assets
Net tangible assets1 per ordinary share ($)	8.00	7.77	7.38	3%	8%
Net tangible assets1 attributable to ordinary shareholders ($M)	14,622	14,199	13,443	3%	9%
Total number of ordinary shares (M)	1,828.7	1,826.4	1,822.7	0%	0%

Capital adequacy ratio (%)
Tier 1	6.8%	6.9%	7.0%
Tier 2	4.0%	3.9%	3.6%
Total capital ratio	10.4%	10.5%	10.3%
Adjusted common equity ratio2	5.0%	5.1%	5.1%

Impaired assets
Collective/general provision ($M)	1,903	2,167	2,080	-12%	-9%
Collective/general provision as a % of risk weighted assets	0.83%	0.99%	0.99%
Collective/general provision3 on fully comparable AIFRS basis ($M)	1,903	1,879	1,768	1%	8%
Collective/general provision3 on fully comparable AIFRS basis
as a % of risk weighted assets	0.83%	0.86%	0.84%
Gross impaired loans ($M)	726	642	640	13%	13%
Individual provisions on impaired loans4 ($M)	(305)	(256)	(314)	19%	-3%
Net impaired loans	421	386	326	9%	29%
Individual provision as a % of total impaired loans	42.0%	39.9%	49.1%
Gross impaired loans as % of net advances	0.28%	0.26%	0.27%
Net impaired loans as a % of net advances	0.16%	0.16%	0.14%
Net impaired loans as a % of shareholders’ equity5	2.2%	2.0%	1.7%

Other information
Full time equivalent staff (FTEs)	31,063	30,976	29,832	0%	4%
Assets per FTE ($M)	10.3	9.6	9.5	7%	8%
Market capitalisation of ordinary shares ($M)	48,461	43,834	37,584	11%	29%

1.	Equals Shareholders’ equity less preference share capital, minority interest and unamortised intangibles
2.	Adjusted common equity is calculated as Tier 1 capital less preference shares at current rates and deductions from total capital. This measure is commonly used to assess the adequacy of common equity held. See page 31 for a reconciliation to Tier 1 capital
3.	Refer footnote 1 page 3. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations
4.	Excludes individual provision on unproductive facilities
5.	Includes minority interest

FINANCIAL HIGHLIGHTS (continued)

Net profit by business unit

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v Sep 05	v Mar 05
	$M	$M	$M	%	%
Net profit after income tax
Personal Banking Australia	542	485	468	12%	16%
Institutional	486	461	450	5%	8%
New Zealand Business	335	265	295	26%	14%
Corporate Australia	212	194	182	9%	16%
Esanda and UDC	53	55	66	-4%	-20%
Asia Pacific	46	44	39	5%	18%
Non continuing business	30	63	63	-52%	-52%
Group centre	107	53	(8)	large	large
Net profit	1,811	1,620	1,555	12%	16%

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Net profit after income tax
Personal Banking Australia	542	485	468	12%	16%
Institutional	486	461	450	5%	8%
New Zealand Businesses	335	265	295	26%	14%
Corporate Australia	212	194	182	9%	16%
Esanda and UDC	53	55	66	-4%	-20%
Asia Pacific	46	44	39	5%	18%
Non-continuing businesses	30	63	63	-52%	-52%
Group Centre	27	16	5	69%	large
Cash1 profit	1,731	1,583	1,568	9%	10%
AIFRS 2005 adjustments1 and non-core items1	80	37	(13)	large	large
Net profit	1,811	1,620	1,555	12%	16%

1.	Refer footnote 1 page 3. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

Net loans and advances including acceptances by business unit

	As at	As at	As at	Movt	Movt
	Mar 06	Sep 05	Mar 05	Mar 06	Mar 06
	$M	$M	$M	v. Sep 05	v. Mar 05
				%	%
Personal Banking Australia	112,212	105,681	99,681	6%	13%
Institutional	46,344	43,404	40,168	7%	15%
New Zealand Businesses1	55,441	55,152	52,094	1%	6%
Corporate Australia	23,941	22,793	21,655	5%	11%
Esanda and UDC	14,365	14,186	13,749	1%	4%
Asia Pacific	2,069	1,777	1,615	16%	28%
Non-continuing businesses	822	1,584	3,091	-48%	-73%
Group Centre	44	1,362	1,263	-97%	-97%
Net loans and advances including acceptances	255,238	245,939	233,316	4%	9%

1.	New Zealand businesses growth rates in NZD terms were 7% and 14% on September 2005 and March 2005 respectively

FINANCIAL HIGHLIGHTS (continued)

Deposits and other borrowings by business unit

	As at	As at	As at	Movt	Movt
	Mar 06	Sep 05	Mar 05	Mar 06	Mar 06
	$M	$M	$M	v. Sep 05	v. Mar 05
				%	%
Personal Banking Australia	46,261	43,773	41,750	6%	11%
Institutional	36,205	32,403	31,886	12%	14%
New Zealand Businesses1	42,127	46,078	46,470	-9%	-9%
Corporate Australia	18,987	18,091	17,070	5%	11%
Esanda and UDC	13,409	12,907	12,167	4%	10%
Asia Pacific	6,032	5,602	5,305	8%	14%
Other	33,829	31,432	29,883	8%	13%
Non-continuing businesses	-	36	647	-100%	-100%
Deposits and other borrowings	196,850	190,322	185,177	3%	6%

1.	New Zealand businesses growth rates in NZD terms were -3% and -3% on September 2005 and March 2005 respectively

CHIEF FINANCIAL OFFICER’S REVIEW

March 2006 half year compared to September 2005 half year

ANZ recorded a profit after tax of $1,811 million for the half year ended 31 March 2006, an increase of 12% over the September 2005 half year. After adjusting for AIFRS 2005 adjustments1 and non-core items1 referred to on pages 11 to 14, cash1 profit increased 9% to $1,731 million. Earnings per share increased 14.0% to 98.4 cents over the September 2005 half. After adjusting AIFRS 2005 adjustments and non-core items1 Cash EPS increased 9.2% to 94.0 cents.

	Half		Half	Half	Movt	Movt
	year		year	year	Mar 06	Mar 06
	Mar 06		Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M		$M	$M	%	%
Net profit attributable to shareholders of the Company	1,811		1,620	1,555	12%	16%
AIFRS 2005 Adjustments1	N/A		(46)	15	n/a	n/a
Profit on a fully comparable AIFRS basis	1,811		1,574	1,570	15%	15%
Less: Non-core items1	(80	)	9	(2)	large	large
Cash1 profit	1,731		1,583	1,568	9%	10%

Net profit

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Net interest income	3,368	2,953	2,865	14%	18%
Other operating income	1,595	1,861	1,717	-14%	-7%
Operating income	4,963	4,814	4,582	3%	8%
Operating expenses	(2,185)	(2,266)	(2,152)	-4%	2%
Profit before credit impairment and income tax	2,778	2,548	2,430	9%	14%
Provision for credit impairment	(224)	(296)	(284)	-24%	-21%
Profit before income tax	2,554	2,252	2,146	13%	19%
Income tax expense	(742)	(630)	(590)	18%	26%
Minority interest	(1)	(2)	(1)	-50%	0%
Net Profit	1,811	1,620	1,555	12%	16%

1.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer page 11 to 14), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability
	In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the NHB insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11)
	In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on economic hedges as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $5 million; Mar 2005: $8 million))
	In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)

Profit growth

Profit increased 12% to $1,811 million. Revenue increased 14% with volume growth partly offset by reduced margins (-7 basis points). Operating expense growth was contained to 2%.

Profit in Australia increased 8% over the September 2005 half year with strong growth in Personal (12%) and Corporate (9%). Profit in Esanda reduced 9%.

Profit in New Zealand increased 24% (25% in NZD terms) with higher lending volumes, a strong performance in the Markets business in Institutional, lower provisions in Corporate Banking and increased earnings on additional equity capital. These increases were partly offset by reduced earnings in UDC and lower earnings in non-continuing businesses from certain structured finance transactions which have been exited. Profit in Asia Pacific increased 9%, driven by volume growth in Fiji, PNG and the Indonesian cards business being partly offset by lower earnings from PT Panin Bank.

Profit in the UK and US decreased driven by reduced profit in non-continuing businesses with the sale of the London headquartered project finance business in 2005 and repatriation of capital.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Cash1 profit

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Net interest income	3,368	3,231	3,140	4%	7%
Other operating income	1,563	1,528	1,407	2%	11%
Operating income	4,931	4,759	4,547	4%	8%
Operating expenses	(2,259)	(2,213)	(2,127)	2%	6%
Profit before credit impairment and income tax	2,672	2,546	2,420	5%	10%
Provision for credit impairment	(224)	(325)	(240)	-31%	-7%
Profit before income tax	2,448	2,221	2,180	10%	12%
Income tax expense	(716)	(636)	(611)	13%	17%
Minority interest	(1)	(2)	(1)	-50%	0%
Cash1 profit2,3	1,731	1,583	1,568	9%	10%

1.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer page 11 to 14), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability
	In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the NHB insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11)
	In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on economic hedges as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $5 million; Mar 2005: $8 million))
	In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)
2.	Refer page 14 for a reconciliation to Net Profit
3.	Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations.

Profit growth

Cash profit increased 9% to $1,731 million. Core1 revenue increased 4% with volume growth partly offset by reduced margins (-7 basis points). Operating expense growth was contained to 2%.

Cash profit in Australia increased 6% over the September 2005 half year with strong growth in Personal (12%) and Corporate (9%). Profit in Esanda reduced 9%.

Cash profit in New Zealand increased 31% (32% in NZD terms) with higher lending volumes, a strong performance in the Markets business in Institutional, lower provisions in Corporate Banking and increased earnings on additional equity capital. These increases were partly offset by reduced earnings in UDC and lower earnings in non-continuing businesses from certain structured finance transactions which have been exited. Profit in Asia Pacific increased 7%, driven by volume growth in Fiji, PNG and the Indonesian cards business being partly offset by lower earnings from PT Panin Bank.

Profit in the UK and US decreased driven by reduced profit in non-continuing businesses with the sale of the London headquartered project finance business in 2005 and repatriation of capital.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

March 2006 half year compared to September 2005 half year, cont’d

Profit drivers

Profit after tax increased 12% over the September 2005 half year. Cash1 profit increased 9% over the September 2005 half. For a discussion of the impact of non-core items and AIFRS 2005 adjustments refer pages 11 to 14.

Significant influences on profit are shown below.

Net interest ñ14% - Adjusted for AIFRS 2005 adjustments and non-core items1 ñ4%:

Net interest income was driven by growth of 6% in interest earning assets, particularly in Institutional (13%), Personal (6%) largely in Mortgages, New Zealand businesses (5%) and Asia Pacific (29%), and deposit growth in Personal (4%), Corporate (5%) and Asia Pacific (9%). Volume growth was partly offset by a 7 basis point decline in margin.

Other income ò14% - Adjusted for AIFRS 2005 adjustments and non-core items1 ñ2%:

Other income growth was driven by volume-related growth in fees and higher profit on trading securities with a strong March half result in New Zealand. These increases were partly offset by reduced foreign exchange income, lower equity accounted income in PT Panin and reduced income in Esanda largely from a reduction in residual values of leased vehicles. Other income is seasonally weaker in the September half.

Operating expenses ò4% - Adjusted for AIFRS 2005 adjustments and non-core items1 ñ2%:

Operating expenses increased slightly reflecting a 2% increase in average staff numbers, largely in Personal and Institutional, offset by reduced costs in the Group Centre.

Provision for credit impairment ò24% - Adjusted for AIFRS 2005 adjustments and non-core items1 ò31%:

The reduction in Provision for credit impairment reflected the Group’s strengthening risk profile. Individual provisions reduced $18 million with a lower number of large single name losses and low levels of default in New Zealand. This was partly offset by the September 2005 half including several large write-backs and recoveries. Collective provisions reduced $83 million, with a lower provision for oil price shock risk.

Income tax ñ18% - Adjusted for AIFRS 2005 adjustments and non-core items1 ñ13%:

The increase in tax expense is driven by growth in profit before tax and a 0.6% increase in the effective tax rate following the run-off of certain structured financing transactions and higher earnings in higher tax rate jurisdictions.

Exchange rates ñ1%

The depreciation of the AUD has resulted in a $5 million increase in the contribution from earnings denominated in foreign currencies, principally New Zealand (net of profit on contracts put in place to hedge USD and NZD revenues). Whilst the average NZD exchange rate moved by only 1%, the closing rate had depreciated by 6% with a corresponding impact on the balance sheet.

1	Refer footnote 1 on page 8

March 2006 half year compared to March 2005 half year

The Group recorded a profit after tax of $1,811 million for the half year ended 31 March 2006, an increase of 16% over the March 2005 half. Cash profit increased 10% over the March 2005 half.

Basic earnings per share increased 18% (15.2 cents) to 98.4 cents. Cash earnings per share (refer page 22) increased 10% (8.3 cents) to 94.0 cents.

Revenue increased 8%. After adjusting for AIFRS 2005 adjustments and non-core items, net interest increased 7% with a 14% increase in average interest earning asset volumes partly offset by a 17 basis point reduction in margin. Other operating income increased 11% with a strong performance in Institutional. Operating costs increased 6% driven by investment in staff principally in 2005.

After adjusting for AIFRS 2005 adjustments and non-core items, cash profit in Australia increased 9%, driven by 16% growth in Personal and 16% growth in Corporate. Cash profit in New Zealand increased 16% in NZD terms including 8% as a result of a lower credit impairment charge. Profit increased by 14% in New Zealand Businesses, 8% in Institutional and higher earnings on capital offset reduced profit in UDC and non-continuing businesses. Cash profit in the Asia Pacific geographies increased 26% with volume related growth and lower credit impairment provisioning. Other geographies reduced 10% reflecting the sale of the London headquartered project finance business in 2005.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Cash profit / non-core items

In calculating cash profit, ANZ has adjusted the income statement for non-core items, as outlined below, to assist readers in understanding the core business performance by removing the volatility in reported results created by one-off significant items, ANZ National Bank incremental integration costs which will not be incurred going forward, the timing differences in the recognition of fair value gains in profit on hedging contracts and the move to the Australian equivalents of International Financial Reporting Standards (AIFRS) which has resulted in different recognition criteria in the March 2006 half than used in the 2005 financial year.

Non-core items in the profit and loss

	Half	Half	Half	Mar 06	Mar 06
	year	year	year	v. Sep	v. Mar
	Mar 06	Sep 05	Mar 05	05	05
Significant items	$M	$M	$M	%	%
Gain on sale of NBNZ Life	-	14	-	-100%	n/a
Settlement of NBNZ warranty claims	14	-	-	n/a	n/a
Settlement of NHB insurance claim	79	-	-	n/a	n/a
Total significant items	93	14	-	large	n/a
Fair value hedge gains/losses	13	12	19	8%	-32%
NBNZ incremental integration costs after tax	(26)	(35)	(17)	-26%	53%
Non-core items	80	(9)	2	large	large

§ Significant items

Significant items in the profit and loss are those items that management believe do not form part of the core business by virtue of their magnitude and infrequent nature and, as such, should be removed from profit when analysing the core business performance. The following are considered significant items:

- Settlement of the NHB insurance claim (March 2006 half year)

During the March 2006 half ANZ settled its $130 million claim with a number of reinsurers over the 1992 and 2002 National Housing Bank (NHB) matter. ANZ has reported the $113 million ($79 million after tax) cost recovery as a significant item in 2006. $1 million was received in 2005 and not treated as significant as it was immaterial.

- Settlement of ANZ National Bank warranty claims (March 2006 half year)

As part of the purchase of the National Bank of New Zealand on 1 December 2003, Lloyds TSB provided ANZ with certain warranties. A claim was made under these warranties in relation to the accounting treatment in the Completion Accounts of the provision for retirement gratuities. As a result of the mediation of this claim, ANZ National Bank received in the March 2006 half $14 million pre-tax revenue ($14 million after tax) on final settlement of the claim.

- Sale of NBNZ Life and Funds Management (September 2005 half year)

On 30 September 2005 ANZ National Bank sold NBNZ Life and Funds Management businesses into a joint venture with ING. Profit after tax on sale of $14 million was recognised.

§ ANZ National Bank incremental integration costs

Expenditure on the integration of ANZ National Bank includes both the reallocation of existing resources to integration and incremental integration costs. Incremental costs are those costs that will not recur once integration is complete and thus do not form part of the core ongoing cost base. During the March 2006 half year $26 million after tax (Sep 2005 half: $35 million; Mar 2005: $17 million) or $39 million before tax (Sep 2005 half: $53 million; Mar 2005 half: $25 million) of incremental integration costs were incurred. This program is now complete.

§ Fair Value hedging gains

As at 1 October 2005, the Group has designated certain fair value hedges and financial liabilities as fair value through profit and loss. Any hedge ineffectiveness will result in volatility through the Income Statement. ANZ has separately reported the impact of volatility due to hedge ineffectiveness as a non-core item as the profit reported on hedge transactions will reverse over time and as such is not part of the core operating performance. During the March 2006 half year $13 million (Sep 2005: $12 million; Mar 2005: $19 million) after tax or $18 million (Sep 2005: $17 million; Mar 2005: $27 million) before tax profit has been reported as a non-core item.

AIFRS 2005 adjustments

The Group implemented accounting policies in accordance with AIFRS on 1 October 2004, except for those relating to financial instruments and insurance contracts, which were implemented on 1 October 2005. The 2005 comparatives for these standards have not been restated in the statutory accounts. To assist readers understand the core business performance on a comparable basis, ANZ has adjusted the 2005 figures to be comparable with the March 2006 half year result within the Chief Financial Officer’s and Business Performance Reviews. The major adjustments are to the provision for credit impairment and recognition of fees as effective yield adjustments to net interest. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability and as there is no impact on cash. Ineffectiveness on these hedges was trivial on the March 2006 half year.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Summary of major AIFRS impacts

The following table reconciles fully comparable AIFRS values with equivalents calculated under previous AGAAP.

	Half		Half	Half	Movt	Movt
	year		year	year	Mar 06	Mar 06
	Mar 06		Sep 05	Mar 05	v. Sep	v. Mar
					05	05
	$M		$M	$M	%	%

Net interest income (previous AGAAP)	3,069		2,945	2,853	4%	8%
Fees recognised as an adjustment to yield1	318		313	309	2%	3%
Reclassified hybrid financial instruments2	(33)		(34)	(32)	-3%	3%
Securitisation and SPVs	16		9	12	78%	33%
Amortisation of StEPS issue costs	(2)		(2)	(2)	0%	0%
Net interest income (fully comparable AIFRS basis)	3,368		3,231	3,140	4%	7%

Other operating income (previous AGAAP)	1,872		1,848	1,704	1%	10%
Fees recognised as an adjustment to yield1	(300)		(326)	(309)	-8%	-3%
Derivatives and hedging3	18		17	27	6%	-33%
Notional goodwill amortisation in joint ventures and associates4	22		22	23	0%	-4%
Securitisation and SPVs	(11)		(8)	(11)	38%	0%
Accounting for INGA	(6)		6	-	large	n/a
Other operating income (fully comparable AIFRS basis)	1,595		1,559	1,434	2%	11%

Operating income (previous AGAAP)	4,941		4,793	4,557	3%	8%
Total AIFRS income adjustments	22		(3)	17	large	29%
Operating income (fully comparable AIFRS basis)	4,963		4,790	4,574	4%	9%

Operating expenses (previous AGAAP)	(2,233)		(2,315)	(2,200)	-4%	2%
Goodwill amortisation5	90		92	87	-2%	3%
Share based payments expense6	(38)		(41)	(39)	-7%	-3%
Other	(4)		(2)	-	100%	n/a
Operating expenses (fully comparable AIFRS basis)	(2,185)		(2,266)	(2,152)	-4%	2%

Profit before credit impairment and income tax (previous AGAAP)	2,708		2,478	2,357	9%	15%
Total AIFRS adjustments (net total of identified above)	70		46	65	52%	8%
Profit before credit impairment and income tax (fully comparable AIFRS basis)	2,778		2,524	2,422	10%	15%

Provision for credit impairment (previous AGAAP)	(334)		(296)	(284)	13%	18%
Movement in credit impairment provisioning7	110		(29)	44	large	large
Provision for credit impairment (fully comparable AIFRS basis)	(224)		(325)	(240)	-31%	-7%

Profit before income tax (previous AGAAP)	2,374		2,182	2,073	9%	15%
Total AIFRS profit before income tax adjustments	180		17	109	large	65%
Profit before income tax (fully comparable AIFRS basis)	2,554		2,199	2,182	16%	17%

Income tax expense and minority interest (previous AGAAP)	(709)		(639)	(598)	11%	19%
Tax on AIFRS adjustments	(34	)	14	(14)	large	large
Income tax expense and minority interest (fully comparable AIFRS basis)	(743)		(625)	(612)	19%	21%

Net profit (previous AGAAP)	1,665		1,543	1,475	8%	13%
AIFRS net profit adjustments	146		31	95	large	54%
Net profit (fully comparable AIFRS basis)	1,811		1,574	1,570	15%	15%

1.	Reclassification of fees and commissions against interest income and measured on the effective yield basis
2.	Reclassification of interest expense on reclassification of ANZ StEPS from equity to debt
3.	Measuring derivatives on a fair value basis and the reclassification of interest expense on non-hedged derivatives to other income
4.	Reversal of notional goodwill amortisation reflected in the take-up of equity accounted earnings of associates and joint ventures
5.	Reversal of goodwill amortisation, goodwill now subject to impairment testing
6.	Share based payments expense recognised for the period covering all share based remuneration, including deferred shares and options
7.	Refer page 26 - Economic loss provisioning

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Summary of major AIFRS impacts, cont’d

The following table reconciles comparative AIFRS (statutory) numbers with equivalent figures on a fully comparable AIFRS basis, including the impact of AASB 139.

	Half	Half
	year	year
	Sep 05	Mar 05

	$M	$M
Net interest income (statutory basis)	2,953	2,865
Fees recognised as an adjustment to yield1	313	309
Reclassified hybrid financial instruments2	(34)	(32)
Other	(1)	(2)
Net interest income (fully comparable AIFRS basis)	3,231	3,140

Other operating income (statutory basis)	1,861	1,717
Fees recognised as an adjustment to yield1	(326)	(309)
Derivatives and hedging3	17	27
Other	7	(1)
Other operating income (fully comparable AIFRS basis)	1,559	1,434

Operating income (statutory basis)	4,814	4,582
Total AIFRS income adjustments	(24)	(8)
Operating income (fully comparable AIFRS basis)	4,790	4,574

Operating expenses (statutory basis)	(2,266)	(2,152)
Other	-	-
Operating expenses (fully comparable AIFRS basis)	(2,266)	(2,152)

Profit before credit impairment and income tax (statutory basis)	2,548	2,430
Total AIFRS adjustments (net total of identified above)	(24)	(8)
Profit before credit impairment and income tax (fully comparable AIFRS basis)	2,524	2,422

Provision for credit impairment (statutory basis)	(296)	(284)
Movement in credit impairment provisioning4	(29)	44
Provision for credit impairment (fully comparable AIFRS basis)	(325)	(240)

Profit before income tax (statutory basis)	2,252	2,146
Total AIFRS profit before income tax adjustments	(53)	36
Profit before income tax (fully comparable AIFRS basis)	2,199	2,182

Income tax expense and minority interest (statutory basis)	(632)	(591)
Tax on AIFRS adjustments	7	(21)
Income tax expense and minority interest (fully comparable AIFRS basis)	(625)	(612)

Net profit (statutory basis)	1,620	1,555
AIFRS net profit adjustments	(46)	15
Net profit (fully comparable AIFRS basis)	1,574	1,570

1.	Reclassification of fees and commissions against interest income and measured on the effective yield basis
2.	Reclassification of interest expense on reclassification of ANZ StEPS from equity to debt
3.	Measuring derivatives on a fair value basis and the reclassification of interest expense on non-hedged derivatives to other income
4.	Restatement of credit loss provisions for an ELP basis under previous AGAAP

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Reconciliation of Net Profit to Cash Profit

The following table reconciles fully comparable AIFRS values with equivalents calculated under previous AGAAP and with fully comparable AIFRS values adjusted to exclude non core items8

	Half		Half		Half
	year		year		year
	Mar 06		Sep 05		Mar 05
	$M		$M		$M
Net interest income (statutory basis)	3,368		2,953		2,865
Fees recognised as an adjustment to yield1	-		313		309
Reclassified hybrid financial instruments2	-		(34	)	(32	)
Other	-		(1	)	(2	)
Net interest income (cash basis)	3,368		3,231		3,140

Other operating income (statutory basis)	1,595		1,861		1,717
Fees recognised as an adjustment to yield1	-		(326	)	(309	)
Derivatives and hedging3	-		17		27
Other	-		7		(1	)
Other operating income (fully comparable AIFRS basis)	1,595		1,559		1,434
Settlement of NBNZ warranty claims4	(14	)	-		-
Fair value hedge gains/losses5	(18	)	(17	)	(27	)
Gain on sale of NBNZ Life4	-		(14	)	-
Other operating income (cash basis)	1,563		1,528		1,407

Operating income (statutory basis)	4,963		4,814		4,582
Total AIFRS income adjustments	-		(24	)	(8	)
Operating income (fully comparable AIFRS basis)	4,963		4,790		4,574
Total significant items income adjustments	(32	)	(31	)	(27	)
Operating income (cash basis)	4,931		4,759		4,547

Operating expenses (statutory basis)	(2,185	)	(2,266	)	(2,152	)
NBNZ incremental integration costs6	39		53		25
Settlement of NHB insurance claim4	(113	)	-		-
Operating expenses (cash basis)	(2,259	)	(2,213	)	(2,127	)

Profit before credit impairment and income tax (statutory basis)	2,778		2,548		2,430
Total AIFRS adjustments (net total identified above)	-		(24	)	(8	)
Profit before credit impairment and income tax (fully comparable AIFRS basis)	2,778		2,524		2,422
Total significant items adjustments (net total identified above)	(106	)	22		(2	)
Profit before credit impairment and income tax (cash basis)	2,672		2,546		2,420

Provision for credit impairment (statutory basis)	(224	)	(296	)	(284	)
Movement in credit impairment provisioning7	-		(29	)	44
Provision for credit impairment (fully comparable AIFRS basis)	(224	)	(325	)	(240	)

Provision for credit impairment (cash basis)	(224	)	(325	)	(240	)

Profit before income tax (statutory basis)	2,554		2,252		2,146
Total AIFRS profit before income tax adjustments	-		(53	)	36
Profit before income tax (fully comparable AIFRS basis)	2,554		2,199		2,182
Total significant items before income tax adjustments	(106	)	22		(2	)
Profit before income tax (cash basis)	2,448		2,221		2,180

Income tax expense and minority interest (statutory basis)	(743	)	(632	)	(591	)
Tax on AIFRS adjustments	-		7		(21	)
Income tax expense and minority interest (fully comparable AIFRS basis)	(743	)	(625	)	(612	)
Tax on significant items adjustments	26		(13	)
Income tax expense and minority interest (cash basis)	(717	)	(638	)	(612	)

Net profit (statutory basis)	1,811		1,620		1,555
AIFRS net profit adjustments	-		(46	)	15
Net profit (fully comparable AIFRS basis)	1,811		1,574		1,570
Significant items net profit adjustments	(80	)	9		(2	)
Net profit (cash basis)	1,731		1,583		1,568

1.	Reclassification of fees and commissions against interest income and measured on the effective yield basis
2.	Reclassification of interest expense on reclassification of ANZ StEPS from equity to debt
3.	Measuring derivatives on a fair value basis and the reclassification of interest expense on non-hedged derivatives to other income
4.	Refer page 11 - Significant items
5.	Refer page 11 - Fair value hedging gains
6.	Refer page 11 - ANZ National Bank incremental integration costs
7.	Refer page 26 - Economic loss provisioning
8.	Refer page 11 for a description of non-core items

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses

Net Interest

				Movt	Movt
	Half	Half	Half	Mar 06	Mar 06
	year	year	year	v. Sep	v. Mar
	Mar 06	Sep 05	Mar 05	05	05
	$M	$M	$M	%	%
Net interest income ($M)	3,368	2,953	2,865	14%	18%
Average interest earning assets ($M)	294,364	261,414	244,906	13%	20%
Net interest margin (%)	2.29	2.26	2.36	1%	-3%
Net interest income (adjusted for AIFRS 2005 adjustments1,3)	3,368	3,231	3,140	4%	7%
Average interest earning assets2 ($M) (adjusted for AIFRS 2005 adjustments)	294,364	274,309	257,606	7%	14%
Net interest margin (adjusted for AIFRS 2005 adjustments1)	2.29	2.36	2.46	-3%	-7%

1.	Refer footnote 1 on page 8
2.	AIFRS 2005 adjustments include the reclassification of customers liability for acceptance from non-interest earning to interest earning (Sep 2005: $13.3 billion; Mar 2005: $13.1 billion) to be consistent with the classification of commercial bill fees as interest
3.	Refer page 14 for a reconciliation of net interest income to cash net interest income

Average Interest Earning Assets

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v Sep 05	v Mar 05
	$M	$M	$M	%	%

Average Interest earning assets	294,364	261,414	244,906	13%	20%
Acceptances reclassed as interest earnings assets	-	13,344	13,134	-	-
Reclass of deferred fees on non Commercial bills	-	(449)	(434)	-	-
Average Interest earning assets (adjusted for AIFRS 2005 adjustments)	294,364	274,309	257,606	7%	14%

§ March 2006 half year compared to September 2005 half year

Net interest income at $3,368 million was 14% ($415 million) higher than the September 2005 half. After adjusting for non-core items and AIFRS 2005 adjustments, cash net interest was 4% ($137 million) higher than the September 2005 half.

Volume

Average interest earning assets increased 13%.

- Average net advances grew by $11.8 billion (5%). Growth in net advances in Australia was attributable to Personal Banking Australia ($18.6 billion or 18% with $4.7 billion in Mortgages or 5%) and Corporate Australia ($1.3 billion or 6%). New Zealand’s average net advances increased by $3.2 billion (5%) with exchange rate impacts (-$1.0 billion). Average net advances grew by $0.6 billion (7%) in Overseas Markets.

- Other interest earning assets increased $7.6 billion (23%), driven by higher levels of liquid assets, trading securities, available-for-sale assets and interbank lending.

Average deposits and other borrowings grew $10.9 billion (6%) with growth in Treasury ($2.3 billion or 13%) to fund asset growth, Personal Banking Australia ($15.9 billion or 37%) and Corporate Australia (-$1.1 billion or -6%). Average deposits and other borrowings increased in New Zealand ($0.8 billion or 1%) with exchange rate impacts ($0.3 billion). Average deposits and other borrowings grew ($0.3 billion or 3%) in Overseas Markets, with exchange rate impacts $0.1 billion.

After adjusting for AIFRS 2005 adjustments, interest earning assets increased 7%

- Average net advances grew by $12.6 billion (5%). Growth in net advances in Australia was attributable to Personal Banking Australia ($5.8 billion or 6% with $4.7 billion in Mortgages or 5%) and Corporate Australia ($1.4 billion or 6%). New Zealand’s average net advances increased by $3.1 billion (5%) with exchange rate impacts (-$0.3 billion). Average net advances grew by $0.6 billion (7%) in Overseas Markets.

- Other interest earning assets increased $7.6 billion (23%), driven by higher levels of liquid assets, trading securities, available-for-sale assets and interbank lending.

Average deposits and other borrowings grew $11.0 billion (6%) with growth in Treasury ($2.3 billion or 13%) to fund asset growth, Personal Banking Australia ($2.2 billion or 5%) and Corporate Australia ($1.3 billion or 7%). Average deposits and other borrowings increased in New Zealand ($0.8 billion or 1%) with exchange rate impacts ($0.3 billion). Average deposits and other borrowings grew ($4.5 billion or 23%) in Overseas Markets, with exchange rate impacts $0.4 billion.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Average Interest Earning Assets, cont’d

Margin

Net interest average margin increased by 3 basis points, however, core net interest margin adjusted for AIFRS 2005 adjustments reduced 7 basis points from the September 2005 half year:

- AIFRS 2005 adjustments (+10 basis points)

Changes predominantly reflect the inclusion of certain fees as net interest income, partially offset by interest expense on Hybrid securities, reported as debt instruments under AIFRS and inclusion of acceptances in average interest earning assets.

- Funding mix (-4 basis points)

Changes in the funding mix reduced the net interest margin due to substitution of wholesale funding for customer deposits (2 basis points) and a decrease in net non-interest bearing items (2 basis points).

- Asset mix (-2 basis point)

Movements in the composition of assets in the portfolio negatively impacted the net interest margin by 2 basis points, reflecting an increase in the proportion of lower yielding non-lending liquid assets in Group Treasury and Institutional.

- Competition (-4 basis points)

Competitive pressures were most marked in Australian Mortgages (1 basis point), Corporate Australia and Institutional (1 basis point), plus migration of customers to lower yielding credit cards and New Zealand fixed rate mortgages (1 basis point) and high yielding deposits (1 basis point).

- Wholesale rates (+2 basis points)

Wholesale rate movements benefited margins from lower basis risk in variable rate mortgages and credit cards plus increased earnings on the investment of capital and rate insensitive deposits (2 basis points), with minimal changes in Treasury mismatch earnings.

- Other items (+1 basis point) include:

· a reduction in retail broker payments and higher earnings from foreign exchange revenue hedging (+1 basis point)

· release of a provision relating to prior year income in Institutional (+2 basis points)

· reduced effective yield fee income decreased margins (-1 basis point)

· other impacts including decreases from change in interest not recognised on impaired loans, discontinued businesses and cash flow impacts on derivatives (-1 basis point)

§ March 2006 half year compared to March 2005 half year

Net interest increased $503 million (18%) over the March 2005 half, or $228 million (7%) after adjusting for AIFRS 2005 adjustments.

Volume

Average interest earning assets increased 20%.

- Average net advances grew by $24.5 billion (11%). Growth in net advances in Australia was attributable to Personal Banking Australia ($24.8 billion or 26% with Mortgages contributing $9.9 billion or 12%), Institutional ($2.1 billion or 7%) and Corporate Australia ($1.3 billion or 6%). New Zealand’s average net advances increased by $6.8 billion (11%) with exchange rate impacts (-$1.2 billion). Average net advances decreased by $0.2 billion (2%) in Overseas Markets.

- Other interest earning assets increased $11.6 billion (40%), driven by higher levels of liquid assets, trading securities, available-for-sale assets and interbank lending.

Average deposits and other borrowings increased $17.3 billion (10%) from growth in Personal Banking Australia ($17.2 billion or 41%), Institutional ($1.9 billion or 10%) and Corporate Australia (-$0.5 billion or -3%). Average deposits and other borrowings increased in New Zealand ($1.3 billion or 3%) with exchange rate impacts (-$1.1 billion). Average deposits and other borrowings grew ($5.3 billion or 28%) in Overseas Markets with exchange rate impacts $0.3 billion.

After adjusting for AIFRS 2005 adjustments, interest earning assets increased 14%:

- Average net advances grew by $25.3 billion (11%). Growth in net advances in Australia was attributable to Personal Banking Australia ($12.0 billion or 12% with Mortgages contributing $9.8 billion or 12%), Institutional ($3.3 billion or 11%) and Corporate Australia ($2.2 billion or 10%). New Zealand’s average net advances increased by $6.6 billion (11%) with exchange rate impacts (-$0.5 billion). Average net advances increased by $0.1 billion (1%) in Overseas Markets.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Average Interest Earning Assets, cont’d

§ March 2006 half year compared to March 2005 half year, cont’d

- Other interest earning assets increased $11.6 billion (40%), driven by higher levels of liquid assets, trading securities, available-for-sale assets and interbank lending.

Average deposits and other borrowings increased $17.3 billion (10%) from growth in Personal Banking Australia ($3.5 billion or 9%), Institutional ($1.9 billion or 10%) and Corporate Australia ($1.9 billion or 11%). Average deposits and other borrowings increased in New Zealand ($1.3 billion or 3%) with exchange rate impacts (-$0.4 billion). Average deposits and other borrowings grew ($5.3 billion or 28%) in Overseas Markets with exchange rate impacts $0.3 billion.

Margin

Net interest average margin reduced by 7 basis points whilst core net interest margin adjusted for AIFRS 2005 adjustments reduced 17 basis points from the March 2005 half:

- AIFRS 2005 adjustments (+10 basis points)

- Funding mix (-7 basis points)

Higher proportions of more expensive wholesale and customer liabilities (-4 basis points) within the portfolio and falling levels of net non-interest bearing interest items (-3 basis points).

- Asset mix (-4 basis points)

Lower proportions of higher yielding assets in Asset Finance and Corporate and Structured Financing reduced margin by 2 basis points and an increase in the proportion of lower yielding non-lending liquid assets in Group Treasury and Institutional (2 basis points)

- Competition (-10 basis points)

Competitive pressures reduced margins, with this impact arising mainly in Mortgages (Australian mortgages 2 basis points, New Zealand mortgages 1 basis points) and Institutional lending with slight margin reductions in Corporate Banking, Business Banking and Rural portfolios. In addition customer migration to lower yielding credit cards and New Zealand fixed rate mortgages reduced the net interest margin (-2 basis points), together with migration into high yielding customer deposits (-2 basis points).

- Wholesale rates (+3 basis points)

Increased income on the investment of capital and rate insensitive deposits (+2 basis points) and less basis risk in variable rate mortgages and credit cards (+1 basis point).

- Other items (+1 basis point) include:

· Funding costs associated with unrealised trading gains increased as a result of movements in the AUD. This decrease in interest income is reflected in the net interest margin, however it is directly offset by an equivalent increase in trading income (-3 basis points)

· Release of revenue relating to prior year income in Institutional (+2 basis points)

· Benefit from mix impacts on discontinued businesses (+2 basis points)

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Other Operating Income

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Other operating income
Total fee income	1,029	1,027	953	0%	8%
Foreign exchange earnings	227	233	221	-3%	3%
Profit on trading instruments	144	93	39	55%	large
Other	163	176	194	-7%	-16%
Core other operating income	1,563	1,529	1,407	2%	11%
AIFRS 2005 adjustments1	N/A	301	283	n/a	n/a
Fair value hedging gains	18	17	27	6%	-33%
Significant items1	14	14	-	0%	n/a
Total other income	1,595	1,861	1,717	-14%	-7%

1.	Refer footnote 1 on page 8. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

§ March 2006 half year compared to September 2005 half year

Other operating income decreased $266 million (14%). After adjusting for AIFRS 2005 adjustments and non-core items, core other operating income increased $34 million (2%) (refer pages 11 to 14 for details).

- Fee income increased $2 million.

· Lending fee income increased $7 million (3%):

- Personal Banking Australia increased $5 million (7%) with a seasonal increase and higher volumes in Banking Products ($3 million or 8%) with a higher number of transaction accounts and Mortgages increasing $2 million (12%) driven by lending growth.

- New Zealand increased $5 million (15%).

- Institutional decreased $4 million (6%) with a $7 million reduction in Corporate and Structured Financing due to large deals in the Structured Debt portfolio closing in the second half of 2005 offset by a $4 million increase in Trade and Transaction Services as a result of an improved performance in Trade Finance.

· Non-lending fee income decreased $5 million (1%):

- Institutional decreased $18 million with Corporate and Structured Financing decreasing $16 million related to a reduction in advisory and syndication fees and coming off a particularly strong September 2005 half.

- Personal Banking Australia increased $12 million (4%) with a $7 million (12%) increase in Investment Insurance Products primarily due to increased volume in commissions from INGA as a result of strong market conditions and funds under management growth, and Banking Products increasing $2 million (4%) related to the continuing strong growth in the transaction banking account base.

- Foreign exchange earnings decreased $6 million (3%) entirely in Institutional where lower foreign exchange swap and spot earnings were offset by increased profit on trading instruments ($24 million, see below). In New Zealand, there was an increase of $28 million in foreign exchange earnings driven by greater currency volatility in the first half of 2006.

- Profit on trading instruments increased $51 million with Institutional increasing $35 million driven by strong growth in New Zealand associated with increased activity and positioning to take advantage of interest rate and currency volatility as well as the profit offsetting the foreign exchange loss referred to above. In addition the six months to September 2005 included the $16 million cost from the hedge of capital investment earnings in INGA which ceased in October 2005.

- Other operating income decreased $13 million (7%):

· Esanda and UDC decreased $17 million due to a $6 million impact from the fall in second-hand car prices and the inclusion of a $7 million gain in the September 2005 half year resulting from the alignment of revenue recognition on leases in the New Zealand Fleet business with Group accounting policies.

· Group Centre decreased $14 million mainly due to the timing of recognition of gains in ANZ’s share of INGA capital investment earnings with the move to available-for-sale classification (high level of realisation of gains in the September 2005 half).

· Non-continuing businesses increased $18 million as a result of a $12 million gain from settlement of the sale warranties relating to the sale of the London headquartered project finance business and a $4 million gain on sale of power assets.

- Movements in average exchange rates over the September 2005 half year were immaterial.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Other Operating Income, cont’d

§ March 2006 half year compared to March 2005 half year

Other operating income decreased $122 million (7%). Core other operating income increased $156 million (11%) after excluding AIFRS 2005 adjustments and non-core items (refer pages 11 to 14 for details).

- Fee income increased $76 million (8%).

§ Lending fee income increased $18 million (9%). Institutional increased $16 million of which $9 million in Corporate and Structured Financing was largely in project financing fees and $6 million was driven by Trade and Transaction Services reflecting an improvement in performance in Trade Finance.

§ Non-lending fee income increased $58 million (8%):

- Personal Banking Australia increased $41 million (13%), of which $17 million in Consumer Finance was driven by volume growth and cross sell initiatives. Investment & Insurance Products increased $12 million due to an increase in income generated by financial planners. Banking Products increased $7 million driven by increased account and transaction numbers.

- New Zealand increased $8 million (4%) driven by card fees and interchange fees from credit card purchases.

- Asia Pacific increased $5 million (21%) primarily due to increased card fees in Indonesia.

- Corporate Australia increased $5 million (13%), which included an increase in advisory fees and ANZ Online fee income.

- Foreign exchange earnings increased $6 million (3%). Trade and Transaction Services increased as a result of continued growth particularly from international payments revenue. There was also growth in Markets in New Zealand driven by positioning for currency volatility in the first half of 2006 and a $10 million increase in the Pacific mainly due to growth in PNG assisted by major mining deals. This was offset by a reduction in Australia where reduced foreign exchange earnings on swap and spot positions were offset in profit on trading instruments.

- Profit on trading instruments increased $105 million:

§ Markets grew by $89 million due primarily to strong growth in New Zealand ($22 million) associated with increased activity and positioning to take advantage of interest rate and currency volatility and a $28 million increase due to revenue growth underpinned by increased frontline staff and initiatives following the restructure in the first half of 2005. Increased profit on swap and spot foreign exchange contracts ($24 million) offset the foreign exchange reduction referred to above. Total income in Markets increased $58 million.

§ Group Centre also increased with the March 2005 half including a $16 million cost as a result of the hedge of capital investment earnings in INGA. Hedging of capital investment earnings ceased in October 2005.

- Other operating income decreased $31 million (16%):

§ Group Centre decreased $18 million due mainly to lower share of INGA capital investment earnings following the capital repatriation in 2005 and the timing of profit recognition on the available-for-sale accounting basis.

§ Esanda and UDC decreased $13 million due largely to the impact of a fall in second-hand car prices.

§ Institutional reduced $10 million with the March 2005 half including a $10 million gain on sale of Sydney Futures Exchange shares.

§ Asia Pacific decreased $7 million due to reduced equity accounted earnings from PT Panin Bank as the first half of 2006 has seen increased pressure on margins from interest rates, increased costs relating to the branch expansion project and reduced bond income.

§ Non-continuing Businesses increased $11 million due to the gain from the settlement of warranties relating to the sale of the London headquartered project finance business as well as the gain on sale of power assets. This was offset by the $4 million profit on sale of the London based headquartered project finance business in the first half of 2005.

§ Personal Banking Australia increased $6 million with Mortgages increasing $4 million as a result of increased insurance premiums driven by higher sales of LMI loans.

- Movements in average exchange rates over the March 2005 half year were immaterial

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Expenses

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Operating expenses
Personnel expenses	1,341	1,286	1,207	4%	11%
Premises expenses	205	197	193	4%	6%
Computer expenses	258	281	260	-8%	-1%
Other expenses	433	427	440	1%	-2%
Restructuring costs	22	22	27	0%	-19%
Core operating expenses	2,259	2,213	2,127	2%	6%
NBNZ incremental integration costs1	39	53	25	-26%	56%
Significant items - settlement of NHB insurance claim	(113)	-	-	n/a	n/a
Total operating expenses	2,185	2,266	2,152	-4%	2%
Total employees	31,063	30,976	29,832	0%	4%

These costs are personnel costs of $22 million (Sep 2005 half: $23 million; Mar 2005 half: $13 million), computer costs of $6 million (Sep 2005 half: $15 million; Mar 2005 half: $2 million), and other costs of $11 million (Sep 2005 half: $15 million; Mar 2005 half: $10 million). Refer page 11 for a description of non-core items, including a discussion of why management believes measures of core performance provide useful information to investors regarding ANZs financial condition and results of operations

§ March 2006 half year compared to September 2005 half year

Operating expenses decreased $81 million (4%) over the September 2005 half year due largely to the $113 million pre-tax settlement of the NHB insurance claim. After adjusting for non-core items, core operating expenses increased $46 million (2%) (refer page 11 for details of non-core items).

- Personnel expenses increased $55 million (4%) as a result of annual salary increases and growth in staff numbers; especially in the September 2005 half.

- Premises costs increased $8 million (4%) driven largely by rental expense reflecting additional space requirements.

- Computer costs decreased $23 million (8%). The reduction was mainly in Operations, Technology and Shared Services due to an $11 million reduction in computer contractors resulting from the completion of business systems integration in New Zealand, a $7 million reduction in depreciation principally as a result of asset write-downs in the second half of 2005 and assets fully depreciating. Lower software licence costs also contributed to the reduction ($3 million).

- Other expenses increased $6 million with non-lending losses increasing $14 million in Institutional and New Zealand (the latter including a NZD10 million Commerce Commission settlement impact and NZD5 million cost of operating relocated domestic systems as part of integration) offset by a $6 million reduction in indirect taxes in Esanda.

- Movements in average exchange rates over the September 2005 half year were immaterial.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Income and expenses, cont’d

Expenses, cont’d

§ March 2006 half year compared to March 2005 half year

Operating expenses increased $33 million (2%) or $132 million (6%) adjusting for non-core items including the $113 million pre-tax settlement of the NHB insurance claim and ANZ National Bank incremental integration costs (refer page 11 for details).

- Personnel costs were up $134 million (11%) due to annual salary increases and a 4% increase in staff numbers mainly in the following business units:

§ Personal Banking Australia increased 6%. Retail Banking increased 5% due to frontline increases primarily as a result of new branch staffing and network initiatives. Consumer Finance increased by 5% following the introduction of the 24 hour call centre in April 2005, increased sales staffing and the introduction of the white-labelling capability.

§ Institutional increased 8% mainly due to a 15% increase in Trade and Transaction Services reflecting business expansion particularly in the Trade Finance and Custodian Services businesses.

§ Asia Pacific increased 10% related mainly to the formation of the ANZ Royal Bank joint venture in Cambodia and the broader partnership agenda as well as business growth and the launch of initiatives in the Pacific mainly in Amerika Samoa, Solomon Islands and PNG.

- Premises costs increased $12 million (6%) with a $7 million increase in rental expense reflecting additional space requirements and a $4 million rise in the cost of security services.

- Computer costs decreased $2 million (1%). A $4 million decrease due to timing of software purchases was offset by a $5 million increase in computer repairs.

- Other expenses were $7 million (2%) lower. This was due to a reduced charge for non-lending losses ($4 million) as the first half of 2005 included a $15 million charge for cheque conversion losses. This was offset by a NZD10 million increase in New Zealand in the first half of 2006 as a result of the Commerce Commission settlement. In addition, there was a $4 million reduction in professional fees due to a decrease in AIFRS and Sarbanes Oxley project costs and a $6 million decline in indirect taxes in Esanda. These were offset by increased travel costs of $11 million.

- Movements in exchange rates reduced cost growth by $5 million.

Income Tax Expense

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Income tax expense on profit	742	630	590	18%	26%
Effective tax rate	29.1%	28.0%	27.5%
Income tax expense on cash profit1	716	636	611	13%	17%
Effective tax rate (cash profit1)	29.2%	28.6%	28.0%

1.	Refer footnote 1 on page 8. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

§ March 2006 half year compared to September 2005 half year

The Group’s income tax expense increased by $112 million to $742 million resulting in an effective tax rate of 29.1%, an increase of 1.1% from the September 2005 half year. The March 2006 half year included the settlement of an ANZ National Bank warranty claim, which was non-taxable, and the September 2005 half year included the non-taxability of profit on sale of NBNZ Life and Funds Management businesses.

Adjusted for AIFRS 2005 adjustment and non-core items, income tax expense increased by $80 million resulting in an effective tax rate of 29.2% an increase of 0.6% from the September 2005 half year. This increase reflects the run-off of certain New Zealand and Australian structured financing transactions and proportionately higher earnings in higher tax rate jurisdictions, predominately New Zealand.

§ March 2006 half year compared to March 2005 half year

The Group’s effective tax rate for the March 2006 half year increased 1.6% from the March 2005 half year.

Adjusted for AIFRS 2005 adjustment and non-core items, the effective tax rate increased 1.2% from the March 2005 half year. This increase reflects the run-off of certain New Zealand and Australia structured financing transactions, lower equity accounted earnings from INGA and PT Panin Bank and proportionately higher earnings in higher tax rate jurisdictions, predominantly New Zealand. The March 2005 half year included the non-taxable profit on sale of Sydney Futures Exchange shares.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Earnings per share

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
				%	%
Earnings per share1 (cents)
Basic	98.4	86.3	83.2	14%	18%
Diluted	96.1	84.3	80.6	14%	19%

Cash earnings per share
Net profit attributable to shareholders of the Company ($M)	1,811.0	1,620.0	1,555.0	12%	16%
Less: non-core items included in profit after tax2 ($M)	(80)	9	(2)	large	large
AIFRS 2005 Adjustments2 ($M)	N/A	(46)	15	n/a	n/a
Cash Profit ($M)4	1,731	1,583	1,568	9%	10%
Preference share adjustments3 ($M)	(12)	(12)	(6)	0%	100%
Earnings adjusted for non-core items and AIFRS 2005 adjustments ($M)	1,719	1,571	1,562	9%	10%
Weighted average number of ordinary shares (M)	1,828.4	1,824.7	1,822.7	0%	0%
Cash earnings per share (cents)	94.0	86.1	85.7	9%	10%

1.	Refer Note 6 for full calculation
2.	Refer page 8
3.	The EPS calculation excludes the Euro preference shares
4.	Refer page 14 for a reconciliation to Net Profit. Refer page 11 for a discussion of why management believes measures of cash profit provides useful information to investors regarding ANZs financial condition and results of operations

Earnings per share increased 14.0% (12.1 cents) to 98.4 cents on the September 2005 half. Cash EPS for the Group increased 9.2% or 7.9 cents on the September 2005 half. The main drivers of the increase in cash EPS on the September 2005 half are:

§ Growth in continuing business profit before provisions contributed 5.4%

§ Reduction in the continuing businesses provision charge contributed 6.5%

§ Partly offset by headwinds, including non-continuing businesses (2.5%) and the dilution by the issuance of shares (-0.2%)

Earnings per share increased 18.3% (15.2 cents) on the March 2005 half. Cash EPS for the Group increased 9.7% or 8.3 cents on the March 2005 half. The main drivers of the increase in cash EPS on the March 2005 half are:

§ Growth in continuing business profit before provisions contributed 10.3%

§ Reduction in the continuing businesses provision charge contributed 2.3%

§ Partly offset by headwinds, including non-continuing businesses (2.6%) and the dilution by the issuance of shares (0.3%)

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Dividends

	Half		Half		Half	Movt	Movt
	year		year		year	Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05	v. Sep 05	v. Mar 05
						%	%
Dividend per ordinary share (cents)
Interim (fully franked)	56		n/a		51	n/a	10%
Final (fully franked)	n/a		59		n/a	n/a	n/a

Ordinary share dividend payout ratio (%)	56.9%		68.4%		61.3%
Net profit after tax ($M)	1,811		1,620		1,555	12%	16%
Non-core items1 and AIFRS 2005 adjustments ($M)	(80	)	(37	)	13	large	large
Cash1 profit ($M)2	1,731		1,583		1,568	9%	10%
Dividend payout ratio of cash1 profit (%)	59.6%		68.6%		59.5%

1.	Refer footnote 1 on page 8
2.	Refer page 14 for a reconciliation to Net Profit. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

The Directors propose that an interim dividend of 56 cents be paid on each ordinary share, up 5 cents (9.8%) on the 2005 interim dividend broadly in line with the growth in Cash EPS (adjusted for non-core items and AIFRS 2005 adjustments). The proposed interim dividend will be fully franked.

The Group has a dividend reinvestment plan and a bonus option plan. Participation in these plans is limited to 50,000 shares in each plan. Election notices for these plans must be received by 5.00 pm (AEST) on the record date, namely, 19 May 2006. It is proposed that the interim dividend will be payable on 3 July 2006. Dividends payable to shareholders with a registered address in Great Britain (including the Channel Islands and the Isle of Man) and New Zealand will be converted to their local currency at ANZ’s daily forward exchange rate at the close of business on the record date for value on the payment date.

The Group expects current timing differences will generate future franking credits and therefore the Group expects it will be able to maintain full franking for the foreseeable future.

EVA Reconciliation

One measure of shareholder value is EVATM (Economic Value Added) growth relative to prior periods. EVATM for the half year ended 31 March 2006 at $1,013 million was up $22 million on the half year ended 30 September 2005, and up $93 million on the March 2005 half.

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
EVATM
Net profit after tax	1,811		1,620		1,555		12%	16%
AIFRS 2005 adjustments and non-core items1	(80	)	(37	)	13		large	large
Cash Profit2	1,731		1,583		1,568		9%	10%
Credit cost adjustment	(74	)	22		(26	)	large	large
Economic profit	1,657		1,605		1,542		3%	7%
Imputation credits	313		308		286		2%	9%
Adjusted economic profit	1,970		1,913		1,828		3%	8%
Cost of ordinary capital	(945	)	(910	)	(902	)	4%	5%
Cost of preference share capital	(12	)	(12	)	(6	)	0%	100%
EVATM	1,013		991		920		2%	10%

1.	Refer footnote 1 on page 8
2.	Refer page 14 for a reconciliation to Net Profit. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial condition and results of operations

EVATM is a measure of risk adjusted accounting profit used for evaluating business unit performance and is a key factor in determining the variable component of remuneration packages. It is based on operating profit after tax, adjusted for non-core items, credit costs, the cost of capital, and imputation credits (measured at 70% of Australian tax). Of these, the major component is the cost of capital, which is calculated on the risk adjusted or economic capital at a rate of 11%. At the Group level, total capital is used so the cost of capital reflects the full resources provided by shareholders. The credit cost adjustment replaces the credit provision charge with economic loss provision after tax at the rate applicable in the relevant geography.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

EVA Reconciliation, cont’d

At ANZ, economic capital is equity allocated according to a business unit’s inherent risk profile. It is allocated for several risk categories including: credit risk, operating risk, interest rate risk, basis risk, mismatch risk, investment risk, trading risk deferred acquisition costs risk and other risk. The methodology used to allocate capital to business units for risk is designed to help drive appropriate risk management and business strategies.

Management believes that EVATM provides useful information to investors regarding ANZs financial conditions and operations because it removes the impacts of non-recurring and other items that are not part of the core business and recognises the cost of investors capital and the long run expected credit losses.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Credit Risk

Individual provision charge

The individual provision charge was $188 million, down $18 million over the September 2005 half. This reduction results from lower single name provisions, especially in New Zealand as well as Esanda and UDC, partially offset by two larger single name provisions in Institutional. This was a strong result given the September 2005 half benefited from large write-backs in non-continuing businesses, due to sales and realisations of non-performing ‘Power’ assets.

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Individual provision charge
Personal Banking Australia	86		87		60		-1%	43%
Institutional	38		11		12		large	large
New Zealand Businesses	6		65		26		-91%	-77%
Corporate Australia	20		18		23		11%	-13%
Esanda and UDC	35		48		24		-27%	46%
Asia Pacific	6		7		17		-14%	-65%
Non-continuing businesses	(3	)	(30	)	(11	)	-90%	-73%
Individual/specific provision charge	188		206		151		-9%	25%

Collective (general) provision charge

Collective (general) provision charges were $36 million, down $54 million over the September 2005 half or $83 million on a comparable basis after AIFRS 2005 adjustments. The reduction over the half was largely driven by improved risk profiles in Institutional, Corporate and New Zealand, a benign credit environment, as well as a partial unwind across all business units of non-customer specific provisions held for oil price risk. Partially offsetting this was some increase for growth and the strategic risk mix change in Personal Banking Australia towards lower rate cards and declining secondhand car prices in Esanda. The increase in the September 2005 half was driven by growth and a $68 million top up for non-customer specific oil price risk, partially offset by a modest improvement in the Group’s overall profile.

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Collective (general) provision charge
Personal Banking Australia	31		46		43		-33%	-28%
Institutional	(5	)	19		9		large	large
New Zealand Businesses	(3	)	24		26		large	large
Corporate Australia	2		28		22		-93%	-91%
Esanda and UDC	14		19		18		-26%	-22%
Asia Pacific	2		6		4		-67%	-50%
Non-continuing businesses	(5	)	(23	)	(33	)	-78%	-85%
Group Centre	-		(29	)	44		-100%	-100%
Collective (general) provision charge	36		90		133		-60%	-73%

Collective (general) provision balance

The collective provision balance at 31 March 2006 was $1,903 million (0.83% of risk weighted assets), a decrease of $264 million from the general provision balance of $2,167 million (0.99% of risk weighted assets) at 30 September 2005. This represents a surplus of $237 million over the APRA minimum guideline. The reduction in balance results from the first time adoption of AIFRS on 1 October 2005.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Credit Risk, cont’d

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
Provision for credit impairment charge	$M		$M		$M		%	%
Personal Banking Australia	117		133		103		-12%	14%
Institutional	33		30		21		10%	57%
New Zealand Businesses	3		89		52		-97%	-94%
Corporate Australia	22		46		45		-52%	-51%
Esanda and UDC	49		67		42		-27%	17%
Asia Pacific	8		13		21		-38%	-62%
Non-continuing businesses	(8	)	(53	)	(44	)	-85%	-82%
Group Centre	-		(29	)	44		-100%	-100%
Provision for credit impairment charge	224		296		284		-24%	-21%

Economic loss provisions (ELP)

With effect from 1 October 2005 the Group has adopted an incurred loss approach to credit loss provisioning as required by AASB 139: ‘Financial Instruments: Recognition and Measurement’. Prior to that date the Group had adopted an economic loss provisioning (ELP) methodology that recognised an expense for credit losses based on the expected long term loss ratio for each part of the loan portfolio.

Management believe that disclosure of ELP data will assist readers in determining the longer term expected loss rates on the lending portfolio as ELP removes the volatility in reported earnings created by the use of an incurred loss methodology. ANZ will continue to use the ELP methodology internally for economic value added (EVA) reporting and as another factor when determining the dividend payout ratio.

The Group economic loss provision charge (ELP) was $334 million, an increase of $38 million (13%) over the half year to September 2005. This increase was driven by growth and the strategically planned ‘risk mix’ shift in Consumer Finance and slightly higher expected losses in Esanda due to a decrease in the realisable value of motor vehicles in default.

	% of	Half	Half	Half
	Group	year	year	year
	Net	Mar 06	Sep 05	Mar 05
	Advances
ELP rates by segment1
Personal Banking Australia	44%	0.22%	0.21%	0.19%
Institutional	18%	0.32%	0.30%	0.31%
New Zealand Businesses	22%	0.17%	0.17%	0.18%
Corporate Australia	9%	0.32%	0.32%	0.32%
Esanda and UDC	6%	0.49%	0.44%	0.45%
Asia Pacific	1%	1.58%	1.38%	1.40%
Non-continuing businesses	0%	0.46%	0.18%	0.26%
Total	100%	0.26%	0.25%	0.26%
ELP charge ($ million)		334	296	284

1. ELP rate = Annualised economic loss provisioning divided by average net lending assets

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Credit Risk, cont’d

Gross impaired loans

Gross impaired loans increased to $726 million, up $84 million from $642 million as at 30 September 2005. This increase was largely driven by two new accounts in Institutional and a small increase in Mortgages. Offsetting this were strong realisations and a falling exchange rate in New Zealand, plus strong realisations in non-continuing businesses.

The default rate (new impaired loans/average gross lending assets) has increased 1 basis point since September 2005 half. This increase was also largely the result of higher new impaired loans in Institutional, offset by lower new impaired loans in New Zealand.

	As at	As at	As at	Movt	Movt
	Mar 06	Sep 05	Mar 05	Mar 06	Mar 06
				v. Sep	v. Mar
	$M	$M	$M	05	05
				%	%
Gross impaired loans
Personal Banking Australia	57	48	37	19%	54%
Institutional	352	189	215	86%	64%
New Zealand Businesses	116	162	81	-28%	43%
Corporate Australia	90	85	120	6%	-25%
Esanda and UDC	82	79	78	4%	5%
Asia Pacific	21	35	36	-40%	-42%
Non-continuing businesses	8	44	73	-82%	-89%
Total gross impaired loans	726	642	640	13%	13%

Net impaired loans

Net impaired loans are $421 million (Sep 2005: $386 million; Mar 2005: $326 million) representing 2.2% of shareholders’ equity as at 31 March 2006 (Sep 2005: 2.0%; Mar 2005: 1.7%). The Group has an individual provision coverage ratio of 42%.

	As at	As at		As at		Movt	Movt
	Mar 06	Sep 05		Mar 05		Mar 06	Mar 06
						v. Sep	v. Mar
	$M	$M		$M		05	05
						%	%
Net impaired loans
Personal Banking Australia	24	19		15		26%	60%
Institutional	249	123		114		large	large
New Zealand Businesses	64	101		35		-37%	83%
Corporate Australia	30	38		54		-21%	-44%
Esanda and UDC	39	40		43		-3%	-9%
Asia Pacific	8	21		14		-62%	-43%
Non-continuing businesses	7	45		52		-84%	-87%
Other	-	(1	)	(1	)	-100%	-100%
Total net impaired loans	421	386		326		9%	29%
Individual provision coverage	42%	40%		49%

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Market Risk

Below are aggregate Value at Risk (VaR) exposures at 97.5% and 99% confidence levels covering both physical and derivatives trading positions for the Bank’s principal trading centres. Figures are converted from USD at closing exchange rates.

97.5% confidence level 1 day holding period

	As at		High for	Low for	Ave for		As at		High for	Low for	Ave for
	Mar 06		period	period	period		Sep 05		period	period	period
			Mar 06	Mar 06	Mar 06				Sep 051	Sep 051	Sep 051
	$M		$M	$M	$M		$M		$M	$M	$M
Value at risk at 97.5% confidence
Foreign exchange	1.1		1.9	0.4	0.9		0.8		1.7	0.3	1.0
Interest rate	1.3		2.3	0.5	1.2		1.2		1.8	0.2	0.9
Credit Spread	1.6		1.7	0.8	1.2		0.8		1.5	0.6	1.0
Diversification benefit	(2.3	)	n/a	n/a	(1.5	)	(1.2	)	n/a	n/a	(1.2	)
Total VaR	1.7		3.2	0.9	1.8		1.6		2.7	0.8	1.7

99% confidence level 1 day holding period

	As at		High for	Low for	Ave for		As at		High for	Low for	Ave for
	Mar 06		period	period	period		Sep 05		period	period	period
			Mar 06	Mar 06	Mar 06				Sep 051	Sep 051	Sep 051
	$M		$M	$M	$M		$M		$M	$M	$M
Value at risk at 99% confidence
Foreign exchange	1.3		2.2	0.3	1.1		0.9		2.1	0.3	1.1
Interest rate	1.7		2.6	0.5	1.4		1.7		2.7	0.2	1.3
Credit Spread	2.9		3.1	1.4	2.3		1.4		2.4	1.0	1.6
Diversification benefit	(3.5	)	n/a	n/a	(2.3	)	(1.8	)	n/a	n/a	(1.7	)
Total VaR	2.4		4.0	1.2	2.5		2.2		3.5	1.0	2.3

1.	Numbers are based on half year period

The table below shows all outstanding revenue hedges, interest income earned and fair value of these hedges.

Revenue related cash flow hedges

	31 March 2006				30 September 20052
	Notional	Amount		Unrealised	Notional	Amount		Unrealised
	Principal	taken to		Gains/	Principal	taken to		Gains/
	Amount	Income		(Losses)	Amount	Income		(Losses)
	$M	$M		$M	$M	$M		$M
USD Revenue Hedges	-	-		-	-	8		-
NZD Revenue Hedges 1	3,776	(3	)	204	3,957	(16	)	41
Total	3,776	(3	)	204	3,957	(8	)	41

1.	Notional principal amount for March 2006 is $3,131 million purchased and $645 million sold contracts from partial close out of hedge. The net open position is $2,486 million. Revenue hedges are treated as cash flow hedges
2.	Numbers are based on half year period

The Group uses a variety of derivative instruments to hedge against the adverse impact on future offshore revenue streams from exchange rate movements. As at 31 March 2006 ANZ had net $2.5 billion (Sep 2005: $4.0 billion; Mar 2005: $3.9 billion) hedge contracts in place.

Movements in average exchange rates resulted in an increase of $5 million in the Group’s profit after tax (net of profit and loss on revenue hedges). Earnings from revenue hedges increased by $5 million (before tax) from the September half. Hedge revenue is booked in the Group Centre as interest income.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Balance Sheet

Total assets increased by $21.3 billion (7%) since 30 September 2005 to $319.4 billion. Exchange rate movements accounted for a net reduction of $3.6 billion consisting of a reduction of $4.7 billion in New Zealand partly offset by a $1.2 billion increase in Overseas Markets. Excluding the impact of exchange rate movements, total assets increased $17.3 billion (9%) in Australia, $8.3 billion (11%) in New Zealand, $1.2 billion (12%) in Asia Pacific and $0.2 billion (2%) in other geographies.

The explanations in the table below describe movements in the major asset classes.

Liquid assets ñ20% (Excl Exchange Rates ñ19%)

Liquid assets increased by $2.3 billion to $13.9 billion at 31 March 2006.

Australia increased $1.1 billion mainly in Group Treasury. New Zealand increased $0.7 billion, despite the weakening NZD, with increased liquidity held by Treasury. Overseas Markets increased $0.5 billion due to a weakening AUD (+$0.3 billion) and increased liquid assets in China and the Treasury operations in New York.

Due from other financial institutions ñ31% (Excl Exchange Rates ñ31%)

Due from other financial institutions increased by $2.0 billion to $8.3 billion at 31 March 2006 due largely to increase in volume of interbank lending, bank overdrafts, securities borrowing volumes in Institutional Australia and interbank lending in the Treasury operations in Singapore, New Zealand and the United States.

Derivatives ñ101% (Excl Exchange Rates ñ104%)

Derivative assets increased $3.8 billion to $7.5 billion at 31 March 2006 driven principally by increased volatility in exchange rates, notably the significant depreciation in the AUD and NZD during March 2006 and increased trading activity. Derivative liabilities increased 45%, also driven by exchange rates.

Trading securities ñ39% (Excl Exchange Rates ñ40%)

Trading securities volumes increased $2.4 billion to $8.7 billion at 31 March 2006 due largely to more active trading in Institutional in Australia ($1.8 billion) and New Zealand ($0.5 billion).

Available-for-sale assets ñ32% (Excl Exchange Rates ñ31%, excl Exchange Rates and AIFRS 2005 Adjustment ñ18%)

Available-for-sale assets include assets previously classified as investment securities and loans and advances and other assets that are available-for-sale. These assets are measured at fair value. Available-for-sale asset volumes increased $3.2 billion to $13.3 billion at 31 March 2006 due to the reclassification of $1.1 billion assets from net loans and advances and other assets on 1 October 2005 on adoption of AIFRS and an increase in available-for-sale loans in Institutional Australia. Increased liquidity holdings in overseas markets have offset reduced levels of available-for-sale securities in New Zealand where a greater proportion of the liquidity portfolio were reported as trading securities.

Net loans and advances ñ4% (Excl Exchange Rates ñ5%)

Net loans and advances increased $9.1 billion since September 2005 to $241.5 billion. Excluding the impact of exchange rate movements (-$3.2 billion) and the impact of adopting AIFRS (-$1.3 billion resulting from changes in credit provisioning and the reclassification to available-for-sale), the increase was $13.6 billion (6%).

Growth in Australia was 5% ($8.6 billion). After adjusting 2005 to a fully comparable AIFRS basis growth was $9.5 billion (6%) largely the result of increases in the following businesses:

- Personal Banking Australia (6% or $6.5 billion), predominantly in Mortgages ($5.4 billion) as a result of growth in housing loans. Consumer Finance increased $0.6 billion, reflecting the success of the low rate MasterCard product, and Regional Commercial and Agribusiness Products grew $0.3 billion.

- Institutional Australia (6% or $1.5 billion) largely in Corporate and Structured Financing ($0.9 billion) due to increased project finance and structured debt activity. Debt Products Group increased $0.3 billion driven by increased demand for funding of mergers and acquisition activity, and volumes in Trade and Transaction Services increased $0.2 billion as a result of growth in overdrafts.

- Corporate Australia (5% or $1.1 billion) largely in Business Banking ($0.6 billion) driven by continued investment in frontline staff and process simplification, the industry specialisation approach to customers and a competitive customer service proposition, and Corporate banking ($0.5 billion).

- Esanda (3% or $0.4 billion) with solid new business writings partly offset by the natural run-off of assets.

New Zealand reduced by $0.2 billion; however, after excluding the impact of exchange rates and impact of adopting AIFRS, growth was $3.7 billion, or 6%, with increases in National Bank Retail ($1.1 billion), ANZ Retail ($1.0 billion), Rural Banking ($0.6 billion), Institutional ($0.2 billion) and Corporate Banking ($0.9 billion) partly offset by a $0.3 billion reduction in non-continuing businesses.

Overseas Markets grew by $0.6 billion (7%). After excluding the impact of exchange rate movements and the impact of adopting AIFRS on 1 October 2005 growth was $0.4 billion (5%) in Asia Pacific ($0.2 billion) and the north west Institutional operations ($0.2 billion).

Customer’s liability for acceptance ñ2% (Excl Exchange Rates ñ2%)

Customer’s liability for acceptance increased by $0.2 billion to $13.7 billion at 31 March 2006 with growth in Institutional Australia ($0.1 billion) and Asia ($0.1 billion).

All other assets ò12% (Excl Exchange Rates ò10%)

Other assets reduced $1.7 billion due mainly to lower trade dated asset volumes in Institutional.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Balance Sheet, cont’d

Total liabilities increased by $22.0 billion (8%) from 30 September 2005. Exchange rate movements accounted for a net reduction of $2.6 billion consisting of a $4.1 billion reduction in New Zealand offset by a $1.5 billion reduction in Overseas Markets.

The explanations in the table below describe movements in the major liability classes.

Due to other financial institutions ñ11% (Excl Exchange Rates ñ10%)

Due to other financial institutions increased $1.3 billion to $13.3 billion at 31 March 2006.

Volumes in Australia increased $1.9 billion principally in the Markets business in Institutional with increased interbank repo activity. Excluding exchange rate movements New Zealand reduced $0.6 billion largely in Structured Finance.

Deposits and other borrowings ñ3% (Excl Exchange Rates ñ5%)

Deposits and other borrowings increased $6.5 billion to $196.9 billion at 31 March 2006. Exchange rate movements reduced deposits and other borrowings by $2.1 billion with a $3.3 billion reduction in New Zealand partly offset by a $1.2 billion reduction in Overseas Markets. Excluding exchange rate movements:

Australia increased $2.7 billion (2%) largely as a result of increases in the following businesses:

- Treasury funding reduced $1.9 billion with a reduced requirement for short-term domestic funding with increased term debt issuance and higher offshore commercial paper funding.

- Personal Banking Australia increased $2.6 billion mainly due to growth in high yielding term deposit and cash management account products.

- Institutional increased $0.5 billion with increased funding in Markets, Corporate and Structured Financing and Debt Product group, partly offset by a slight reduction in corporate deposits in Trade and Transaction Services.

- Corporate Australia increased $0.9 billion, with strong growth across all segments.

- Esanda increased $0.6 billion to fund asset growth.

New Zealand increased $1.5 billion (3%), largely in Institutional ($2.7 billion), National Bank retail ($0.6 billion) ANZ Retail ($0.4 billion) and Corporate Banking ($0.6 billion) partly offset in Treasury (-$2.8 billion) with increased term funding allowing a reduction in shorter term commercial paper and certificate of deposit funding.

Overseas Markets increased by $4.9 billion largely due to increased commercial paper issuance by ANZ Delaware ($3.4 billion) and the requirement to fund balance sheet growth.

Payables and other liabilities ñ27% (Excl Exchange Rates ñ30%)

Payables and other liabilities increased $2.1 billion (27%) to $9.7 billion at 31 March 2006 with an increase in securities lending volumes in Institutional.

Derivatives ñ45% (Excl Exchange Rates ñ49%)

Derivative liabilities increased $1.9 billion to $6.1 billion at 31 March 2006. The increase is driven by increased volatility in exchange rates, principally the significant movement in the NZD during March and increased trading activities. The movement is consistent with the movement in Derivative assets

Bonds and Notes ñ20% (Excl Exchange Rates ñ14%)

Bonds and notes increased $7.9 billion to $46.9 billion at 31 March 2006. Excluding exchange rate movements, bonds and notes increased by $5.5 billion in response to increased term funding requirements.

Loan Capital ñ22% (Excl Exchange Rates ñ18%)

Loan capital increased $2.0 billion to $11.1 billion at 31 March 2006 in response to term funding requirements and the reclassification of ANZ StEPS from equity to debt on adoption of AIFRS on 1 October 2005.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Capital Management

	As at		As at		As at
	Mar 06		Sep 05		Mar 05
Tier 1	6.8	%	6.9	%	7.0	%
Tier 2	4.0	%	3.9	%	3.6	%
Deductions	(0.4	%)	(0.3	%)	(0.3	%)
Total	10.4	%	10.5	%	10.3	%
ACE	5.0	%	5.1	%	5.1	%
RWA $m	230,653		219,573		209,524

ACE Ratio

The ACE ratio at 5.0% remains at the upper end of the Group’s targeted capital range. During the period, ACE ratio declined 9 basis points principally due to:

§	net profit excluding preference share dividends of $1.8 billion (+82 basis points);
§	ordinary share dividend commitments of $1.0 billion (-47 basis points);
§	buy-back of ordinary equity of $146 million (-7 basis points) being offset by share issues of $179 million (+8 basis points) through the Bonus Option Plan, Dividend Reinvestment Plan, option conversions and issues to staff;
§	increase in risk weighted assets, excluding the impact of exchange rate movements (-30 basis points);
§	increase in investment/profit retention in funds management businesses and associates (-12 basis points); and
§	exchange rate movements and opening AIFRS adjustments had an immaterial impact.

Hybrid Capital and Tier 1 Capital

The Group raises hybrid capital to supplement the Group’s ACE capital to further strengthen the Group’s capital base and ensure compliance with APRA’s prudential capital requirements, principally its Tier 1 capital requirements.

At 31 March 2006 the Group had three Hybrid Capital instruments on issue:

Hybrid Capital details

	ANZ StEPS	US Stapled Trust Security	Euro Hybrid
Amount (in issue currency)	$1,000 million	USD1,100 million	€500 million
Accounting classification	Debt	Debt	Equity
Regulatory (APRA) classification	Tier 1	Tier 1	Tier 1
March 2006 balance	$1,000 million	$1,536 million	$871 million
Interest rate	BBSW +1.00%	Tranche 1 Coupon: 4.48% Tranche 2 Coupon: 5.36%	Euribor +0.66%

On adoption of AIFRS on 1 October 2005 the ANZ StEPS issue was reclassified from equity to debt, however, it continues to be classified as Tier 1 capital for regulatory purposes.

Buy-Back of Ordinary Equity

The Group commenced an on-market buy-back of $350 million of ordinary equity on 10 January 2005. The buy-back was completed 14 March 2006 with the Group repurchasing 15.7 million shares at an average cost of $22.26 per share. Shares repurchased for the current half-year was 6.1 million shares at an average cost of $24.02 per share, totalling $146 million.

Prudential Issues – APRA’s proposals on AIFRS changes and Tier 1 hybrid capital

APRA has recently released several announcements concerning the development of the prudential capital standards that will be adopted on 1 July 2006 post the adoption of AIFRS. The final format and content of these standards are still subject to on-going discussions between APRA and the financial industry.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Capital Management, cont’d

AIFRS and capital deductions

In November 2005, APRA issued draft prudential standards and guidance notes outlining the proposed prudential capital treatment of various adjustments arising from the adoption of AIFRS. This statement was supplemented in March 2006 with the issue of a statement dealing with Capitalised Software Costs. Based upon these statements and discussions to date with APRA, the issues that most affect ANZ are:

§ APRA introduced transition rules requiring ADIs to report their prudential capital ratios up until 1 July 2006 based upon AGAAP existing at 30 September 2005, unless otherwise agreed with APRA. ANZ has agreed alternative arrangements with APRA and is reporting capital ratios based upon its financial statements subject to reversing the impact of recognising deferred pension liabilities, deferred fee revenue and cash flow hedge accounting of derivatives. At 1 October 2005 the impact on ACE capital of the various AIFRS adjustments, net of the transitional rules, was a reduction of $48 million.

§ Effective 1 July 2006:

- The transitional rules agreed with APRA will cease and a deduction for the pension liability ($91 million as at 31 March 2006) will be required to be taken; and

- Capitalised Software Costs are classified as an intangible asset under AIFRS and APRA has indicated that they be taken as a Tier 1 deduction. At 31 March 2006 ANZ had $384 million of capitalised software costs (before tax).

§ APRA introduced further transitional rules in their April 2006 statement on Tier 1 Capital and Securitisation, where ADIs will calculate the impact of AIFRS on their capital base at 1 July 2006, and this amount, the ‘IFRS transitional adjustment’, will be added back to an ADIs capital base between 1 July 2006 and 1 January 2008. The ‘IFRS transitional adjustment’ will effectively defer any adverse impact from adopting AIFRS accounting until introduction of BASEL II. ANZ is in discussion with APRA on this issue; based upon the items outlined above, ANZ would anticipate an add back to capital of approximately $500 million as an ‘IFRS transitional adjustment’.

Tier 1 Capital and Securitisation

In April 2006, APRA issued draft prudential standards and guidance notes outlining what instruments and items will qualify for Tier 1 and Tier 2 capital, including sub-categories therein for hybrid Tier 1, Lower and Upper Tier 2. Material changes from the existing prudential standards are:

§ Introduction of a sub-category of Tier 1 capital being ‘Fundamental Tier 1’ which includes most components of shareholders equity, excluding hybrid Tier 1 instruments. This sub-category must be at least 75% of net Tier 1, which effectively reduces the level of hybrid Tier 1 capital (‘Residual Tier 1’) to 25% of net Tier 1 – previously it was 25% of Tier 1 before deductions.

§ Splitting hybrid Tier 1 into two sub-categories, ‘Innovative’ and ‘Non-Innovative’ Tier 1, with limits of 15% and 10% of net Tier 1 respectively. Transition rules will be available to ADI’s up until January 2010 if the ADI is above these limits when first measured on 1 January 2008 based upon hybrid Tier 1 instruments on issue at 31 August 2005 (subject to certain conditions being met).

§ The ‘Non-Innovative’ category is a new classification covering instruments that have the characteristics of ‘non-cumulative, irredeemable preference shares without innovative capital features’.

§ ANZ believes that its existing hybrid Tier 1 instruments will be classified as ‘Innovative’ and as such ANZ expects that it will be applying for the transitional relief contemplated in the draft standard.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

ANZ National Bank - Integration

The integration program that began in 2004 has been completed during the half. The key achievements in this half have been:

§ Transfer from Australia to New Zealand of the location and operation of ANZ Retail and related systems and functions to complete compliance with Reserve Bank of New Zealand (RBNZ) Conditions of Registration 13(i)

§ Completion of the successful migration to ANZ Group systems in Institutional, and Corporate Banking

§ Transition of all New Zealand processes and systems to Business-As-Usual management.

The integration objectives have been successfully achieved:

§ Business integration is complete. This has delivered integration of organisational and management structures, processes, systems, and premises for Institutional, Corporate Banking, Rural Banking, Retail Banking support functions, head office and central support functions which has facilitated:

- establishing a common platform for future growth initiatives and further transformation of support services

- growing our Institutional businesses under the ANZ brand

- maintaining separately branded Retail and Corporate Banking businesses

- strengthening our Rural banking business primarily under National Bank brand

- merging and rationalising head office and support functions

- aligning, to the extent possible, ANZ National and ANZ technology systems and functions.

§ Compliance with RBNZ Conditions of Registration 13(i) relating to location and operation of “domestic” systems in New Zealand. This delivered the transfer of ANZ Retail, HR/Payroll, and General Ledger systems to New Zealand, the augmentation of New Zealand-based IT support staff, and establishment of certain “new” New Zealand-based business functions

§ Customer satisfaction and retention targets have been achieved – revenue attrition relating to integration activities has continued to track favourably against estimates

§ Staff engagement has been achieved, and a single enterprise agreement has been established

§ Realisation of integration synergies has tracked in line with expectations.

Integration has successfully delivered a major program for ANZ National Bank:

§ 30 workstreams comprising approximately 150 individual projects have progressed successfully in line with plans

§ Around 1300 system changes have been successfully implemented

§ At its peak over 600 staff were contributing to the program

§ 126 property relocations were implemented

§ Project execution has been completed substantially by the ambitious target of December 2005, with the final major deliverables completed in February 2006.

The RBNZ finalised its Outsourcing Policy in January 2006. The Policy addresses the location and management of so called core functions requiring ANZ National Bank to maintain continuity of core functions - settlement, clearance, payment and risk position management – particularly in a stress or failure situation. Discussions continue with the RBNZ on outlining ANZ National Bank’s approach to compliance with the Policy.

As the full impact of RBNZ requirements under the Conditions of Registration were clarified, the total cost of integration increased. The total cost of integration has been NZD239 million, in line with the estimate of NZD240 million advised in October 2005 and a modest increase on the original estimate of NZD220 million. Of this amount, approximately 5% has been met by a restructuring charge included in the calculation of goodwill; a further 10% relates to expenditure on equipment that has been capitalised and 22% relates to the cost of existing resources. Integration costs of NZD9 million were incurred in 2004, with the majority of integration costs of NZD139 million incurred in 2005. Expenditure of NZD51 million was incurred in this first half of 2006. These costs related primarily to systems and technology integration and non-branch expenses, with NZD46 million incurred in meeting RBNZ requirements, NZD19 million expenditure on integrating essential technology infrastructure and NZD174 million expenditure on the core business program of integration.

Revenue attrition relating to integration activities has continued to track favourably against expectations, with little attrition evident, and has stabilised at NZD34 million per annum. The cost synergies and revenue benefits, net of NZD12 million cost increase impact of RBNZ requirements have increased to an estimated NZD120 million in 2007 (cost synergies NZD70 million and revenue synergies NZD50 million, with additional cost synergies identified.)

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

ING Australia performance

The results in the table below show the performance of INGA on a fully comparable AIFRS basis, other than the half year to March 2005 which adopts AIFRS from 1 January 2005 (i.e. commencement of INGA’s financial year). In addition, the results have been restated to exclude net profits from the New Zealand business that INGA sold in September 2005; these are included in New Zealand Businesses.

		Half		Half		Half		Movt		Movt
		year		year		year		Mar 06		Mar 06
		Mar 06		Sep 05		Mar 05		v. Sep		v. Mar
								05		05
		$M		$M		$M		%		%
	Note
Funds management income		208		191		177		9	%	18	%
Life Risk Income
- planned margin		89		85		83		5	%	7	%
- experience variation	1	33		25		27		32	%	22	%
		122		110		110		11	%	11	%
Total Income		330		301		287		10	%	15	%
Funds management expenses		(136	)	(125	)	(128	)	9	%	6	%
Life risk expenses		(64	)	(39	)	(45	)	64	%	42	%
Remediation Expenses	2	(24	)	(23	)	(15	)	4	%	60	%
Tax on operating profit	3	(18	)	(32	)	(15	)	-44	%	20	%
Operating profit after tax, before capital investment earnings		88		82		84		7	%	5	%
Capital investment earnings after tax		28		63		70		-56	%	-60	%
Profit after tax		116		145		154		-20	%	-25	%

ANZ’s Share of INGA earnings @ 49%		57		71		76		-20	%	-25	%

ANZ’s Share of INGA earnings @ 49%
JV operating profit		43		40		41		8	%	5	%
JV capital investment earnings		14		31		35		-55	%	-60	%
		57		71		76		-20	%	-25	%
ANZ capital Hedges		-		(10	)	(11	)
Net Funding		1		-		2
Net Return to ANZ	4	58		61		67		-5	%	-13	%
Performance measures
Carrying value of investment ($M)	5	1,407		1,392		1,404
ANZ return on investment	5	8.1	%	10.2	%	10.8	%
Available for Sale reserve (ANZ share) ($M)		14		8		12
Value of new business	6	34		33		29
Cost to Income	7	60	%	58	%	59	%
Funds management
Retail & mezzanine funds under management (c/bal $M)		33,731		31,696		29,390		6	%	15	%
Net retail & mezzanine flows ($M)		415		216		259		92	%	60	%
Life risk
Total in-force ($M)		536		496		482		8	%	11	%
New premiums ($M)		65		62		53		5	%	23	%
		Mar 06		In-		Out-		Other		Sep 05
Funds management growth (Retail & mezzanine)	8	$M		flows		flows		Flows		$M
OneAnswer		12,861		1,890		(1,080	)	597		11,454
Other Personal Investment		9,381		247		(837	)	482		9,489
Mezzanine		2,466		249		(316	)	108		2,426
Employer Super		9,023		837		(574	)	433		8,327
Total		33,731		3,223		(2,807	)	1,620		31,696

1.	Experience gains or losses arise where actual outcomes differ from valuation methods and assumptions
2.	Remediation expenses represent costs incurred in rectifying historical unit pricing errors and fully compensating customers
3.	Transitional tax relief for life insurance companies discontinued with effect from 1 July 2005
4.	On 30 September 2005 ING Australia sold its New Zealand based businesses to a joint venture between ING Group and ANZ National Bank (further details are contained on page 11). As a result, prior period profits relating to the sold operations (Sep 2005: $4 million; Mar 2005: $4 million) are now reflected in the ING NZ joint venture
5.	ANZ adopts the equity method of accounting for its 49% interest in INGA. The carrying value of the investment in INGA has been tested for impairment by comparing the carrying value with the recoverable amount of INGA. The Group engaged Ernst & Young ABC Limited (EY ABC) to provide an independent valuation of INGA for 31 March 2006 assessment purposes (the recoverable amount). The independent economic valuation was based on a discounted cash flow approach, with allowance for the cost of capital. Based on the results of this valuation, no change is required to the carrying value of the investment in INGA
6.	Value of new business represents the present value of future profits arising from the new business written over the periods less the present value of the cost of capital applying to that new business. Consistent value factors are applied across all reporting periods
7.	Cost to Income ratio is management expenses (excluding Remediation Expenses) / Total Income
8.	Other Flows includes investment income net of taxes, fees and charges

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

ING Australia performance, cont’d

March 2006 half year compared to September 2005 half year

Highlights of the March 2006 half year included the launch of INGA’s new retail risk product, “OneCare” and a marked improvement in net inflows of retail and mezzanine funds management products, up 92%. The increase was driven by strong inflows into INGA’s flagship platform product, OneAnswer, and lower outflows across INGA’s wealth management products. INGA also acquired majority ownership of Oasis Asset Management, a rapidly growing provider of badged platform products to non-aligned advisers.

Considerable progress was made in remediation of products and systems. This work is now separated from INGA’s core business and is scheduled for completion by 31 December 2006.

INGA has maintained its market share rankings over the period. In Funds Management the improvement in net flows over the year has lifted INGA’s ranking to 6th position as reported by Plan For Life. INGA maintained its 3rd place ranking in the employer super mastertrust segment as measured by DEXX&R. INGA’s rankings in the life risk market for both new business (3rd) and Inforce premiums (4th) as measured by Plan for Life remained unchanged.

A core component of INGA’s strategy is to grow the number of aligned advisers. Following the acquisition of the Synergy dealer group in December 2005 the total number of INGA ‘aligned advisers’ grew to 1,093. According to the latest Money Management Survey, INGA would rank 4th in terms of number of advisers, up from 7th position in the previous half.

Profit after tax decreased by 20% on the September 2005 half year. Operating profit after tax was 7% higher, but more than offset by lower capital investment earnings. Significant factors affecting the result were:

§ Funds management income increased by 9% based on higher average funds under management underpinned by strong investment markets, and improved net flows in both personal investments and employer super businesses. The increased fee revenue driven by these factors was partly offset by reduced margins arising from higher commission payments.

§ Risk income increased by 11%. Operating margins relating to INGA’s life risk business increased by 6% following better client retention and improved claims experience.

§ Funds management expenses increased by 9% due to higher spend on customer service. Life risk expenses increased due to costs incurred in developing the new OneCare product and other non-recurring items. Remediation expenses are at similar levels to the September 2005 half and should be completed by the end of the calendar year.

§ Tax on operating profit decreased 44% due to favourable prior period tax adjustments in the current half, partially offset by the loss of transitional tax relief for life companies from 1 July 2005.

§ Capital investment earnings after tax declined 56% from the strong September 2005 half due to lower average capital employed in the business together with lower average yields. In 2005, ANZ partially hedged against volatility in this income stream and, as a result, gains in capital investment earnings were partially offset by hedge losses. ANZ ceased hedging capital investment earnings from 1 October 2005.

Adviser Numbers

(by Dealer Group)

	Mar 06	Mar 05	Mvmt
ANZ Financial Planners	348	305	14%
Retire Invest	214	214	0%
Tandem	84	79	6%
Millenium 3	446	350	27%
ING Financial Planners	21	2	large
Other
Total	1,113	950	17%

Sales by Channel

(12 months )

	Retail Funds Management		Life Insurance
	Mar 06	Mar 05	Mar 06	Mar 05

ANZ Bank	47%	50%	12%	10%
IFAs aligned to ING	17%	18%	8%	9%
Direct	7%	7%	49%	41%
Other	29%	25%	31%	39%
Total	100%	100%	100%	100%

March 2006 half year compared to March 2005 half year

Profit after tax decreased by 25% compared to the same period last year. Operating profit after tax was 5% higher, but more than offset by lower capital investment earnings. Significant factors impacting the result were:

§ Funds management income increased by 18% based on higher average funds under management underpinned by strong investment markets, and improved net flows.

§ Risk income increased by 11% due to ongoing favourable claims experience in the March 2006 half, supported by continued strong sales of life insurance products through the ANZ network and direct marketing initiatives.

§ Expenses increased due to higher spend on customer service in funds management together with additional costs associated with the new OneCare product and other non-recurring items in the life risk business. Remediation expenses increased by 60% as activity increased.

§ Tax on operating profit increased by 20% due to the loss of transitional tax relief for life companies from 1 July 2005, and was partially offset by lower favourable prior period tax adjustments booked in the current half.

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

ING New Zealand joint venture

In September 2005 ANZ National Bank Limited entered into a joint venture with ING Insurance International Limited (INGII). The joint venture, ING (NZ) Holdings Ltd (INGNZ), is 49% owned by ANZ National Bank Limited and 51% owned by INGII.

The Group adopts the equity method of accounting for its 49% interest in INGNZ. As at 31 March 2006, the equity accounted value was NZD156 million (Sep 2005: NZD145 million). The change since September 2005 reflects the equity accounted profit for the half year.

The carrying value is subject to a recoverable amount test to ensure that this does not exceed its recoverable amount at the reporting date. The Group obtained an independent valuation at 31 March 2006 to ensure the carrying value did not exceed the recoverable amount. The valuation supported the carrying value and accordingly no write-down was made.

In the March 2006 half INGNZ contributed NZD12 million in equity accounted earnings. This was a NZD3.1 million reduction on the September 2005 half in which a total of NZD15.2 million (Mar 2005: NZD14.1 million) was reported between INGA (Sep 2005: NZD4 million; Mar 2005: NZD 4 million) and the New Zealand Businesses (Sep 2005: NZD11 million; Mar 2005: NZD10 million), prior to the establishment of the joint venture.

Deferred acquisition costs and deferred income

The Group recognises assets that represent deferred acquisition costs relating to the acquisition of interest earning assets, and liabilities that represent deferred income relating to income received in advance of services performed.

Deferred acquisition costs - at 31 March 2006 the Group’s assets included $549 million (Sep 2005: $524 million; Mar 2005: $492 million) in relation to costs incurred in acquiring interest earning assets. During the half year, amortisation of $138 million (Sep 2005 half: $135 million; Mar 2005 half: $123 million) was recognised as an adjustment to the yield earned on interest earning assets.

Deferred income - at 31 March 2006, the Group’s liabilities included $426 million (Sep 2005: $92 million; Mar 2005: $130 million) in relation to income received in advance. At March 2006, this includes $5 million (Sep 2005: $3 million; Mar 2005 $4 million) deferred service type fees. These fees are deferred and will be amortised over the period of service under the AIFRS standard AASB 118: ‘Revenue’.

At March 2006, fee income of $364 million that is integral to the yield of an originated financial instrument, net of any direct incremental costs, has been capitalised. This income is deferred and recognised against net loans and advances over the expected life of the financial instrument under the AIFRS standard AASB 139: ‘Financial Instruments: Recognition and Measurement’.

The balances of deferred acquisition costs and deferred income at period end were:

	Deferred Acquisition Costs1			Deferred Income
	Mar 06	Sep 05	Mar 05	Mar 06	Sep 05	Mar 05
	$M	$M	$M	$M	$M	$M
Personal Banking Australia	155	153	151	90	32	24
Esanda	294	284	260	52	-	-
New Zealand Businesses	67	61	49	39	15	26
Institutional	5	6	10	162	27	30
Other2	28	20	22	83	18	50
Total	549	524	492	426	92	130

1.	Deferred acquisition costs largely include the amounts of brokerage capitalised and amortised in the three Business segments: Personal Banking Australia, Esanda and the New Zealand businesses. Deferred acquisition costs also include capitalised debt raising expenses
2.	Includes Group Centre, Corporate Australia, INGA and Asia Pacific

Deferred acquisition costs analysis:

	March 2006		September 2005 half
	Amortisation	Capitalised	Amortisation	Capitalised
	Costs	Costs1	Costs	Costs1
	$M	$M	$M	$M
Personal Banking Australia	34	36	31	33
Esanda	87	97	86	110
New Zealand Businesses	13	24	13	23
Institutional	1	-	2	(2	)
Other2	3	11	3	3
Total	138	168	135	167

1.	Costs capitalised during the half exclude brokerage trailer commissions paid, relating to the acquisition of mortgage assets
2.	Includes Group Centre, Corporate Australia, INGA and Asia Pacific

CHIEF FINANCIAL OFFICER’S REVIEW (continued)

Software capitalisation

At March 2006, the Group’s intangibles included $384 million (Sep 2005: $381 million; Mar 2005: $401 million) in relation to costs incurred in acquiring and developing software. During the March 2006 half year, amortisation expense of $56 million (Sep 2005 half: $64 million; Mar 2005 half: $57 million) was recognised.

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Balance at start of period	381		401		430		-5%	-11%
Software capitalised during the period	60		51		45		18%	33%
Amortisation during the period	(56	)	(64	)	(57	)	-13%	-2%
Software written-off	(1	)	(8	)	(16	)	-88%	-94%
Other	-		1		(1	)	-100%	-100%
Total software capitalisation	384		381		401		1%	-4%

BUSINESS PERFORMANCE REVIEW

Profit and Loss (including effect of movements in foreign currencies)

	Half	Half	Half		Movt	Movt
	year	year	year		Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05		v. Sep 05	v. Mar 05
	$M	$M	$M		%	%
Net profit after income tax
Personal Banking Australia	542	485	468		12%	16%
Institutional	486	461	450		5%	8%
New Zealand Businesses	335	265	295		26%	14%
Corporate Australia	212	194	182		9%	16%
Esanda and UDC	53	55	66		-4%	-20%
Asia Pacific	46	44	39		5%	18%
Non-continuing businesses	30	63	63		-52%	-52%
Group Centre	27	16	5		69%	large
Cash1 profit3	1,731	1,583	1,568		9%	10%
AIFRS 2005 adjustments and non-core items1	80	37	(13	)	large	large
Net profit	1,811	1,620	1,555		12%	16%

Refer to page 6 for a table of Net profit after income tax prepared on a statutory basis

Profit and Loss (prior period figures adjusted to remove the impact of exchange rate movements2)

	Half	Half		Half		Movt	Movt
	year	year		year		Mar 06	Mar 06
	Mar 06	Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M	$M		$M		%	%
Net profit after income tax
Personal Banking Australia	542	485		468		12%	16%
Institutional	486	461		450		5%	8%
New Zealand Businesses	335	263		293		27%	14%
Corporate Australia	212	194		182		9%	16%
Esanda and UDC	53	55		65		-4%	-18%
Asia Pacific	46	45		40		2%	15%
Non-continuing businesses	30	62		64		-52%	-53%
Group Centre	27	23		9		17%	large
Net profit (adjusted for non-core items1,2,3)	1,731	1,588		1,571		9%	11%
AIFRS 2005 adjustments1 and non-core items2	80	37		(13	)	large	large
Net profit3	1,811	1,625		1,558		12%	17%
FX impact on reported net profit2	-	(5	)	(3	)	-100%	-100%
Reported net profit	1,811	1,620		1,555		12%	16%

1.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer pages 11 to 14), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability. In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the NHB insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11). In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges, ineffective portions of cash flow hedges, profit or loss on disposal of investment securities, and fair value movement in bonds and notes designated at fair value as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $5 million; Mar 2005: $8 million)). In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)
2.	ANZ has removed the impact of exchange rate movements to provide readers with a better indication of the business unit performance in local currency terms. Retranslation is net of revenue hedge earnings
3.	Refer pages 13 and 14 of enclosed report for a detailed reconciliation of GAAP figures to non GAAP cash figures. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZ financial condition and results of operations

The Group from time to time modifies the organisation of its businesses to enhance the focus on delivery of specialised products or services to customers. Prior period numbers are adjusted for such organisational changes to allow comparability. The significant changes since 30 September 2005 have been:

§ Non-Continuing Business - The Non-Continuing Business comprising the London headquartered project finance and certain structured finance transactions that ANZ has exited as part of its de-risking strategy has been removed from Institutional and reported as a separate business unit.

§ Personal Banking – Within Personal banking Wealth Management has been renamed Investment Insurance Products.

§ There were also a number of minor restatements as a result of customer segmentation, changes to internal transfer pricing methodologies and the realignment of support functions.

§ ANZ has netted inter-business unit expenses and inter-business unit income and reported as an expense for business unit profitability purposes.

BUSINESS PERFORMANCE REVIEW (continued)

Personal Banking Australia

Brian Hartzer


Rural Commercial and	Consumer Finance
Agribusiness Products	Investment Insurance Products
Banking Products	Other 1
Mortgages

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%

Net interest income	1,177		1,122		1,061		5%	11%
Other external operating income	509		483		452		5%	13%
Operating income	1,686		1,605		1,513		5%	11%
External operating expenses	(726	)	(705	)	(677	)	3%	7%
Net inter business unit expenses	(88	)	(90	)	(82	)	-2%	7%
Operating expenses	(814	)	(795	)	(759	)	2%	7%
Profit before credit impairment and income tax	872		810		754		8%	16%
Provision for credit impairment	(117	)	(133	)	(103	)	-12%	14%
Profit before income tax	755		677		651		12%	16%
Income tax expense and minority interest	(213	)	(192	)	(183	)	11%	16%
Net profit attributable to shareholders of the Company	542		485		468		12%	16%

Consisting of:
Rural Commercial and Agribusiness Products	55		48		49		15%	12%
Banking Products	138		130		123		6%	12%
Mortgages	177		156		146		13%	21%
Consumer Finance	115		101		103		14%	12%
Investment and Insurance Products	60		52		51		15%	18%
Other2	(3	)	(2	)	(4	)	50%	-25%
	542		485		468		12%	16%

Balance Sheet
Net loans & advances including acceptances	112,212		105,681		99,681		6%	13%
Other external assets	2,196		1,840		1,979		19%	11%
External assets	114,408		107,521		101,660		6%	13%
Deposits and other borrowings	46,261		43,773		41,750		6%	11%
Other external liabilities	2,500		2,268		2,058		10%	21%
External liabilities	48,761		46,041		43,808		6%	11%
Risk Weighted Assets	62,184		58,489		54,897		6%	13%

Ratios
Net interest margin	2.16%		2.16%		2.19%
Return on assets	0.98%		0.92%		0.95%
Return on risk weighted assets	1.81%		1.69%		1.77%
Operating expenses to operating income	48.3%		49.5%		50.2%
Operating expenses to average assets	1.47%		1.52%		1.54%
Individual provision charge	(86)		(87)		(60)
Individual provision charge as a % of average net advances	0.16%		0.17%		0.12%
Net impaired loans	24		19		15		26%	60%
Net impaired loans as a % of net advances	0.02%		0.02%		0.02%
Total employees	9,799		9,616		9,254		2%	6%

1.	2005 figures include allocations to make them comparable with March 2006
2.	Other includes the branch network, whose costs are fully recovered from product business units, Private Banking and marketing and support costs
Core business performance excludes significant items and AIFRS adjustments

BUSINESS PERFORMANCE REVIEW (continued)

Personal Banking Australia

Brian Hartzer

March 2006 half year compared to September 2005 half year

Profit after tax increased 12%, underpinned by strong loan and deposit growth (balances increased 6% in both categories) while maintaining a disciplined approach to pricing. Overall returns on risk adjusted assets increased, with margin growth in higher risk products offsetting the expected rise in bad debt costs.

Balance sheet growth drove the double digit earnings growth in Mortgages and Consumer Finance, while Rural Commercial and Agribusiness benefited from an improved credit environment. Banking Products continued to grow the deposit book above system levels. Investment & Insurance Products experienced strong growth from financial planner sales and other ‘direct’ investment businesses and benefited from a 7% increase in INGA income.

Significant aspects to the result were:

§ Overall net interest income increased 5%. Mortgages and Rural Commercial and Agribusiness Products net interest income grew 6% in line with balance sheet growth as margins were held. Consumer Finance net interest income increased 6% with strong balance sheet growth of 10% partly offset by margin decline driven by strong growth in the lower rate MasterCard product. Banking Products net interest income increased by 3% with good deposit growth of 6% being partly offset by ongoing migration into lower margin products within the portfolio.

§ Other operating income increased 5%. Mortgages grew other income 28%, while Consumer Finance was relatively flat. Banking Products grew other income by 5% from higher numbers of transaction accounts. Financial planning income was up 11% from higher sales volumes. The contribution from the INGA increased following strong funds management and life risk performances. The underlying momentum in this business remains sound as market conditions are favourable and the life business continues to experience low levels of claims.

§ Operating costs increased 2% as the footprint expanded with 11 new branches and 134 more ATMs. This contributed to a 5% increase in premises costs and a 5% increase in personnel costs, with the latter also affected by annual salary rises. Computer costs fell as the previous half included charges for branch software now amortised fully.

§ Credit costs reduced 12% overall as there was a $16 million beneficial adjustment in collective provisions due to a revision to oil price risk. Despite strong balance sheet growth individual provisions were flat reflecting seasonally lower March half year charges.

March 2006 half year compared to March 2005 half year

Profit after tax increased 16% with double digit profit growth recorded by all Personal businesses driven by a strong income performance.

Operating income increased 11% driven by strong volume growth across all businesses partly offset by margin contraction as higher growth was experienced in lower margin business. Double digit income growth was achieved by Mortgages (14%), Consumer Finance (13%) and Investment & Insurance Products. Sound revenue growth was achieved in Banking Products revenues (8%) and Rural Commercial and Agribusiness (7%). All businesses benefited from the investment in staff through the continued expansion of the footprint.

Operating expenses increased 7%, resulting from higher numbers of front line staff to service increased business volumes and ongoing investment in the branch network.

Credit impairment rose largely due to increases in overall lending volumes and the planned higher relative growth of Consumer Finance businesses, partly offset by a lower level of collective provisioning due to a revision to oil price risk.

BUSINESS PERFORMANCE REVIEW (continued)

Institutional

Steve Targett


Client Relationship Group	Corporate and Structured Financing
Trade and Transaction Services	Debt Product Group
Markets
Other 1

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	568		509		544		12%	4%
Other external operating income	590		577		493		2%	20%
Operating income	1,158		1,086		1,037		7%	12%
External operating expenses	(339	)	(324	)	(310	)	5%	9%
Net inter business unit expenses	(90	)	(78	)	(72	)	15%	25%
Operating expenses	(429	)	(402	)	(382	)	7%	12%
Profit before credit impairment and income tax	729		684		655		7%	11%
Provision for credit impairment	(33	)	(30	)	(21	)	10%	57%
Profit before income tax	696		654		634		6%	10%
Income tax expense and minority interest	(210	)	(193	)	(184	)	9%	14%
Net profit attributable to shareholders of the Company	486		461		450		5%	8%
Consisting of:
Trade & Transaction Services	115		104		101		11%	14%
Markets	144		128		117		13%	23%
Corporate and Structured Financing	79		66		65		20%	22%
Debt Product Group	199		213		218		-7%	-9%
Other1	(51	)	(50	)	(51	)	2%	-
	486		461		450		5%	8%

Balance Sheet
Net loans & advances including acceptances	46,344		43,404		40,168		7%	15%
Other external assets	35,658		26,439		23,672		35%	51%
External assets	82,002		69,843		63,840		17%	28%
Deposits and other borrowings	36,205		32,403		31,886		12%	14%
Other external liabilities	31,389		22,712		20,660		38%	52%
External liabilities	67,594		55,115		52,546		23%	29%
Risk Weighted Assets	78,691		72,429		68,797		9%	14%

Ratios
Net interest margin	1.66%		1.70%		2.02%
Return on assets	1.28%		1.33%		1.50%
Return on risk weighted assets	1.28%		1.33%		1.39%
Operating expenses to operating income	37.0%		37.0%		36.8%
Operating expenses to average assets	1.13%		1.16%		1.27%
Individual provision charge	(38)		(11)		(12)		large	large
Individual provision charge as a % of average net advances	0.17%		0.05%		0.06%
Net impaired loans	249		123		114		large	large
Net impaired loans as a % of net advances	0.54%		0.28%		0.28%
Total employees	3,092		3,047		2,864		1%	8%

1.	Other includes Executive, Infrastructure and Client Relationship Group costs, not all of which are allocated to the Institutional businesses
Core business performance excludes significant items and AIFRS adjustments

BUSINESS PERFORMANCE REVIEW (continued)

Institutional

Steve Targett

March 2006 half year compared to September 2005 half year

Profit after tax increased by $25 million (5%), as growth momentum established in the last half continued to strengthen. Strategic initiatives, aimed at tightening client focus and increasing solution driven sales, began to deliver improved results across the Institutional businesses this half.

Non-lending revenue increased reflecting the success of continuing efforts to move the mix of business from the debt product with disciplined use of capital and strong risk management. The Client Relationship Group actively leads the delivery of our client solutions.

Profit from Markets increased by 13% driven by a strong performance in New Zealand where currency and interest rate moves created favourable trading conditions, compared to the less volatile environment and softer corporate demand in the Australian market. Trade and Transaction Services increased 11% with high growth in the International Payments and Clearing Services business, strong offshore Trade Finance growth and the release of revenue that related to prior years. Corporate and Structured Financing profit increased 20% with a lower credit impairment charge resulting from the write-back of individual provisions during the half. Asset growth in the Debt Products Group was offset by competitive pressures and tighter credit spreads resulting in reduced margins and a 7% decrease in earnings. Credit quality remains sound.

Significant factors affecting the result were:

§ Net interest income grew by $59 million (12%). Trade and Transaction Services increased $29 million including increased deposit volumes and the release of revenue that related to prior years, partly offset by reduced lending volumes in International Trade Finance. Markets increased $11 million, Debt Products Group increased by $7 million, with lending growth of 2% offset by tighter spreads and competition causing margin erosion and Corporate and Structured Financing increased $12 million.

§ Overall loan volumes increased 7%, while deposit volumes increased 12%. Net interest margin decreased by 4 basis points.

§ Other operating income increased $13 million (2%). Markets increased $27 million (9%) on the back of a strong New Zealand result and Trade and Transaction Services increased $5 million. Corporate and Structured Financing other operating income reduced $13 million (14%), with strong contributions from structured finance and private equity offset by reduced advisory fees following the particularly strong September 2005 half. Other operating income reduced by $5 million in Debt Products Group, driven by competitive pricing pressure.

§ Operating expenses have increased by 7%, reflecting the investment being made in new growth initiatives and higher non-lending losses. Salary expenses increased 4%, and staff numbers increased by 1%. Institutional is building its staff capabilities to facilitate greater penetration of new business opportunities.

§ Provision for credit impairment increased by $3 million. The individual provision charge was $27 million higher, with two large new provisions in the half in Australia and New Zealand offset by recoveries. The collective provision charge reduced by $24 million with a reduction in the provision held for oil price risk, the impact of the increase in individual provisions resulting from the down-grade of two large exposures to non-accrual and a stable risk profile on our lending assets. Net impaired loans have increased by $126 million due largely to two corporate accounts in Australia and New Zealand.

March 2006 half year compared to March 2005 half year

Profit after tax increased by $36 million (8%).

Operating income increased by 12%. Revenue in Trade and Transaction Services increased $54 million on the back of stronger trade flows through Asia and the UK, increased International Payments foreign exchange revenue and the prior year income booked in the March 2006 half. Markets revenue increased $58 million with stronger client and trading activities in Australia, New Zealand, the Pacific and Asia. Debt Products Group increased 1% with higher revenue and lending volume growth offset by margin contraction.

Operating expenses increased 12%. Staff costs were higher, due to investment in people, new capabilities and systems.

Provision for credit impairment increased $12 million. Individual provisions increased reflecting the down-grade of two large accounts during the current half. Collective provision reduced reflecting the factors mentioned above.

BUSINESS PERFORMANCE REVIEW (continued)

New Zealand Businesses

Graham Hodges


ANZ Retail	Corporate Banking
National Bank Retail	Central Support (including Treasury)
Rural Banking	Excludes Institutional, UDC,
	integration and central funding

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	NZD M		NZD M		NZD M		%	%
Net interest income	811		780		774		4%	5%
Other external operating income	268		270		253		-1%	6%
Operating income	1,079		1,050		1,027		3%	5%
External operating expenses	(538	)	(533	)	(496	)	1%	8%
Net inter business unit expenses	3		2		(4	)	50%	large
Operating expenses	(535	)	(531	)	(500	)	1%	7%
Profit before credit impairment and income tax	544		519		527		5%	3%
Provision for credit impairment	(3	)	(97	)	(56	)	-97%	-95%
Profit before income tax	541		422		471		28%	15%
Income tax expense and minority interest	(175	)	(134	)	(151	)	31%	16%
Net profit attributable to shareholders of the Company (NZD)	366		288		320		27%	14%
Net profit attributable to shareholders of the Company (AUD)	335		265		295		26%	14%

Consisting of:
ANZ Retail	98		92		99		7%	-1%
NBNZ Retail	128		109		110		17%	16%
Rural Banking	44		43		42		2%	5%
Corporate Banking	79		32		53		large	49%
Central Support	17		12		16		42%	6%
	366		288		320		27%	14%
Balance Sheet
Net loans & advances including acceptances	64,866		60,656		56,777		7%	14%
Other external assets	6,120		5,290		4,156		16%	47%
External assets	70,986		65,946		60,933		8%	16%
Deposits and other borrowings	49,288		50,676		50,648		-3%	-3%
Other external liabilities	10,265		8,083		5,308		27%	93%
External liabilities	59,553		58,759		55,956		1%	6%
Risk Weighted Assets	52,015		48,098		45,381		8%	15%
Ratios
Net interest margin	2.42%		2.49%		2.68%
Return on assets	1.07%		0.91%		1.09%
Return on risk weighted assets	1.47%		1.27%		1.46%
Operating expenses to operating income	49.6%		50.6%		48.7%
Operating expenses to average assets	1.57%		1.67%		1.71%
Individual provision charge	(7)		(70)		(28)		-90%	-75%
Individual provision charge as a % of average net advances	0.02%		0.24%		0.10%
Net impaired loans	75		111		38		-32%	97%
Net impaired loans as a % of net advances	0.12%		0.18%		0.07%
Total employees	8,466		8,580		8,437		-1%	0%

Core business performance excludes significant items and AIFRS adjustments

BUSINESS PERFORMANCE REVIEW (continued)

New Zealand businesses

Graham Hodges

March 2006 half year compared to September 2005 half year

Profit after tax for the New Zealand Businesses increased NZD78 million (27%) over the September 2005 half, assisted by a NZD63 million after tax reduction in the Provision for credit impairment. Profit before provisions increased 5%.

ANZ Retail, National Bank Retail and Corporate Banking posted strong profit growth with increases of 7%, 17% and 147% respectively. Solid asset growth in these businesses was partly offset by lower net interest margins due to price competition, increased wholesale funding, and continued unfavourable product mix with switching from variable rate to fixed rate mortgages. Profit before provisions grew by 5% in National Bank Retail and 4% in Corporate Banking. Profit before provisions in ANZ Retail and Rural Banking was flat, reflecting the competitor-driven net interest margin reduction and a seasonally stronger second half in Rural Banking. The results of the Retail Banks also include the liability for costs and compensation to customers relating to a Commerce Commission action on disclosure of optional issuer fees (NZD10 million) and the cost of the operation of domestic systems relocated to New Zealand under the integration program (NZD5 million).

Key influences on the result include the following:

§ Net interest income increased 4% (NZD31 million). Lending volumes increased 7% in NZD terms with growth in National Bank Retail (5%), ANZ Retail (8%), Corporate Banking (11%) and Rural (6%). NZD deposit volumes increased 5% in customer businesses with solid deposit growth in Corporate Banking (14%) and ANZ Retail (4%), where the On-line Call product was particularly successful. Deposits and other borrowings in Treasury reduced with other sources of wholesale funding increased to fund asset growth across the New Zealand businesses.

Net interest margins have reduced 7 basis points impacted by competition and customer migration from variable rate to fixed rate mortgages, increased requirement for wholesale funding, changes in deposit mix with growth in lower margin call (including ANZ On-line Call ) and term deposit products. Lending margins in Rural decreased slightly reflecting competition. These factors were partially offset by slightly stronger deposit margins.

§ Other operating income reduced marginally. Other income in National Bank Retail increased 12% relating to transactional and credit card accounts. Other income in Corporate Banking reduced, mainly in fees, with these being ‘lumpy’ and seasonal in nature. Fees in Rural Banking were flat as were fees in ANZ Retail. Treasury other income reduced $2 million but was offset by an increase in net interest income.

§ Operating expenses increased 1%. Salary increases, a small increase in numbers of front-line staff, and the cost of the Commerce Commission settlement (NZD10 million) were largely offset by a 6% reduction in the number of support staff and control of discretionary spend.

§ Provision for credit impairment reduced by NZD94 million. The collective provision reduced by NZD31 million, with increased lending volumes being offset by a lower provision for oil price risk, and an improved credit risk profile (an increased proportion of low risk residential and rural lending). The individual provision charge reduced by NZD63 million largely as a result of provisioning for two isolated corporate accounts and exposures to the apple and pear export industry in the preceding September half. Net impaired loans reduced NZD36 million as a result of the generally benign credit conditions.

March 2006 half year compared to March 2005 half year

Profit after tax increased 14%, with growth in National Bank Retail (16%), Rural Banking (5%), and Corporate Banking (49%). Profit in ANZ Retail was flat. Profit before provisions grew by 3% overall with growth in National Bank Retail (6%), Corporate Banking (8%) and Rural Banking (5%), partly offset by a reduction in ANZ Retail (-5%).

§ Net interest income increased 5%. Lending volumes increased 14% in NZD terms, with growth in all businesses, whilst deposits grew 8% in National Bank Retail and ANZ Retail. Interest margin has declined by 26 basis points reflecting the impact of competition, in particular the ‘mortgage price war’ in the March 2005 half, product switching from variable rate to fixed rate mortgages, and a change in funding mix to higher rate deposit and wholesale products.

§ Other operating income increased 6%. Other income in National Bank Retail increased 20%, relating to transactional and credit card accounts. Other income in Corporate Banking reduced, mainly in fees, with these being ‘lumpy’ in nature. Fees in Rural Banking and ANZ Retail also reduced slightly.

§ Operating expenses increased 7% with salary increases and a small increase in staff numbers reflecting an increased investment in frontline staff, and the NZD10 million cost associated with the Commerce Commission settlement and NZD5 million domestic system costs as discussed above.

§ Provision for credit impairment reduced NZD53 million. The individual provision charge reduced as a result of the provisioning for a number of isolated corporate accounts in the March 2005 half, and recoveries of previously provisioned corporate accounts in the current half. The collective provision charge reduced as a result of a lower provision for oil price risk, and an improved credit risk profile with lending growth mainly in low risk residential mortgages.

BUSINESS PERFORMANCE REVIEW (continued)

Corporate Australia

Mark Paton


Corporate Banking Australia
Business Banking Australia
Small Business Banking

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	461		447		432		3%	7%
Other external operating income	83		80		76		4%	9%
Operating income	544		527		508		3%	7%
External operating expenses	(137	)	(123	)	(124	)	11%	10%
Net inter business unit expenses	(82	)	(80	)	(79	)	3%	4%
Operating expenses	(219	)	(203	)	(203	)	8%	8%
Profit before credit impairment and income tax	325		324		305		0%	7%
Provision for credit impairment	(22	)	(46	)	(45	)	-52%	-51%
Profit before income tax	303		278		260		9%	17%
Income tax expense and minority interest	(91	)	(84	)	(78	)	8%	17%
Net profit attributable to shareholders of the Company	212		194		182		9%	16%

Consisting of:
Business Banking Australia	103		92		89		12%	16%
Corporate Banking Australia	86		80		72		8%	19%
Small Business Banking	23		22		21		5%	10%
	212		194		182		9%	16%

Balance Sheet
Net loans & advances including acceptances	23,941		22,793		21,655		5%	11%
Other external assets	130		109		113		19%	15%
External assets	24,071		22,902		21,768		5%	11%
Deposits and other borrowings	18,987		18,091		17,070		5%	11%
Other external liabilities	6,822		6,822		6,511		0%	5%
External liabilities	25,809		24,913		23,581		4%	9%
Risk Weighted Assets	23,450		22,301		21,007		5%	12%
Ratios
Net interest margin	3.60%		3.66%		3.69%
Return on assets	1.66%		1.60%		1.56%
Return on risk weighted assets	1.82%		1.78%		1.75%
Operating expenses to operating income	40.3%		38.5%		40.0%
Operating expenses to average assets	1.72%		1.67%		1.74%
Individual provision charge	(20)		(18)		(23)		11%	-13%
Net individual provision as a % of average net advances	0.17%		0.16%		0.22%
Net impaired loans	30		38		54		-21%	-44%
Net impaired loans as a % of net advances	0.12%		0.17%		0.25%
Total employees	2,025		1,987		1,924		2%	5%

Core business performance excludes significant items and AIFRS adjustments

BUSINESS PERFORMANCE REVIEW (continued)

Corporate Australia

Mark Paton

March 2006 half year compared to September 2005 half year

Profit after tax increased by 9%, driven by strong balance sheet growth and continued improvement in the credit quality of the lending portfolio, partially offset by the impact of competitive pressures on margins and fees. The business franchise remains strong with leading levels of customer satisfaction and low propensity to switch, as well as very high levels of employee engagement. The business model has been further enhanced by the ongoing expansion of the Wall Street to Main Street (WSTMS) proposition for the Corporate market, the newly created Small Business segment and our industry specialisation models. ANZ received the CFO Magazine Business Bank of the Year award for 2005.

Significant influences on the result were:

§ Net interest income increased 3% driven by growth in both average lending (6%) and average deposits (7%).

The solid growth in average lending (Corporate Banking 7%, Business Banking 6% and Small Business Banking 16%) and average deposit volumes (Corporate Banking 7%, Business Banking 7% and Small Business Banking 10%) was the result of a continued focus on new customer acquisition as well as growth from existing customers. Key factors in achieving growth were ANZ’s leading customer service proposition, continued investment in people and process simplification, as well as the industry and local market specialisation approach to customers.

The net interest margin declined by 6 basis points, largely driven by ongoing competitive pressures in the lending book, as well as some moderate compression of margins on the deposit portfolio.

§ Other external operating income increased 4%, largely from continued growth in the WSTMS proposition, including private equity exit profits, with marginal growth in other fees. The WSTMS proposition continues to grow our portfolio and future earnings potential, with 13 deals closing this half, bringing the total Corporate Private Equity portfolio value to over $200 million.

§ Operating expenses increased 8% including:

- the impact of an expense refund relating to prior periods in the September 2005 half year;

- continued investment in front line staff (particularly in Small Business) and the WSTMS proposition and the creation of new Corporate Banking regions; and

- higher branch costs as a result of our increased branch footprint.

After adjusting for these factors Operating expenses, including the impact of annual salary rises and on-going commitment to the Graduate program, were well managed at 2%.

§ The benefits of our on-going productivity agenda are reflected in the increase in revenue per average FTE. Productivity gains in back and middle office operations and shared service areas have been used to partially fund the on-going investment program. The cost to income ratio remains low at 40% in line with last half, allowing for the impact of the expense refund in September 2005.

§ Credit quality remains sound and the overall quality of our credit portfolio has improved over the period. This reflects the strong focus on risk management and compliance in both the Business Banking and Corporate Banking segments and the impact of the continued de-risking of our portfolio, as well as the strength of the economy and business confidence. Provision for credit impairment decreased by 52% and impaired loans as a percentage of net loans and advances decreased to 0.12% over the period.

March 2006 half year compared to March 2005 half year

Profit after tax increased 16%, with solid growth in all businesses. Net interest income increased 7% due to growth of 10% in average lending and 11% growth in average deposit volumes. Net interest margins declined 9 basis points due principally to competitive pressures. Other external operating income increased by 9% due to an increase in advisory and ANZ Online fee income. Operating costs increased by 8% mainly due to continued investment in frontline staff and salary increases. Provision for credit impairment decreased by 51% and net impaired loans as a percentage of net advances reduced by 52% reflecting the improvement in the quality of the credit portfolio.

BUSINESS PERFORMANCE REVIEW (continued)

Esanda and UDC

David Hisco


	A leading provider of vehicle and equipment finance, rental services and
	fixed and at call investments. Operates in Australia as Esanda and Esanda
	FleetPartners and in New Zealand as UDC and Esanda FleetPartners

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	202		207		202		-2%	-
Other external operating income	25		42		37		-40%	-32%
Operating income	227		249		239		-9%	-5%
External operating expenses	(84	)	(82	)	(82	)	2%	2%
Net inter business unit expenses	(18	)	(18	)	(20	)	0%	-10%
Operating expenses	(102	)	(100	)	(102	)	2%	-
Profit before credit impairment and income tax	125		149		137		-16%	-9%
Provision for credit impairment	(49	)	(67	)	(42	)	-27%	17%
Profit before income tax	76		82		95		-7%	-20%
Income tax expense and minority interest	(23	)	(27	)	(29	)	-15%	-21%
Net profit attributable to shareholders of the Company	53		55		66		-4%	-20%
Net interest margin	2.65	%	2.79	%	2.82	%
Operating expenses to operating income	44.9	%	40.2	%	42.7	%
Individual provision charge	(35	)	(48	)	(24	)	-27%	46%
Net impaired loans	39		40		43		-3%	-9%
Total employees	1,335		1,352		1,349		-1%	-1%

Core business performance excludes significant items and AIFRS adjustments

March 2006 half year compared to September 2005 half year

Profit after tax decreased by 4%. Profit growth in Australia of 9% was offset by a 31% profit reduction in New Zealand which was impacted by structural changes made last year and competitive pressure. Overall the Australian business continues to provide opportunities for future profit growth. A number of actions are underway in the New Zealand businesses to return to profitable growth.

Significant influences on the result were:

§ Net interest income declined 2%, with a 3% increase in lending volumes in Australia from solid new business writings offset by an 11% reduction in volumes in New Zealand. A 14 basis point decline in margins resulted from the run-off of higher yielding loans during the half which were replaced by lower margin new business. Pricing initiatives have been put in place to stabilise margins and grow revenue, the impact of which will flow through in the March 2007 half.

§ Other operating income decreased 40%, due to a $6 million impact from a fall in second-hand car prices as well as the inclusion of a $7 million gain in the September 2005 half year resulting from the alignment of revenue recognition on leases in the New Zealand Fleet business with Group accounting policies.

§ Operating expenses increased by 2% due to annual salary increases. These increases were partly offset by a $6 million reduction in indirect taxes.

§ Provision for credit impairment decreased by 27% despite a 1% increase in lending volumes. Individual provision charge was lower compared to the 2005 half, largely associated with improvement in the commercial loan portfolio and the exited aircraft lease business ($9 million) in 2005.

March 2006 half year compared to March 2005 half year

Profit after tax decreased by 20%. Net interest income was flat with a 5% increase in lending volumes offset by a 17 basis point margin reduction. Other operating income decreased 32% due to a $10 million impact from the fall in second-hand car prices. Operating expenses were flat with an increase in personnel costs due to annual salary increases offset by a $6 million reduction in indirect taxes. Provision for credit impairment increased 17% and individual provision charge increased $11 million with an individual loss of $5 million in the March 2006 half.

BUSINESS PERFORMANCE REVIEW (continued)

Asia Pacific

Bob Edgar

	Provision of retail and corporate banking services in the Pacific region and
	Asia, including ANZ’s share of PT Panin Bank in Indonesia; this business
	excludes Institutional businesses, which are a ‘matrix’ responsibility and
	included in Institutional business unit results. Geographic results are
	included on page 51

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	96		89		80		8%	20%
Other external operating income	71		71		70		0%	1%
Operating income	167		160		150		4%	11%
External operating expenses	(103	)	(93	)	(83	)	11%	24%
Net inter business unit expenses	1		1		-		0%	n/a
Operating expenses	(102	)	(92	)	(83	)	11%	23%
Profit before credit impairment and income tax	65		68		67		-4%	-3%
Provision for credit impairment	(8	)	(13	)	(21	)	-38%	-62%
Profit before income tax	57		55		46		4%	24%
Income tax expense and minority interest	(11	)	(11	)	(7	)	0%	57%
Net profit attributable to shareholders of the Company	46		44		39		5%	18%
Operating expenses to operating income	61.1	%	57.5	%	55.3	%
Individual provision charge	(6	)	(7	)	(17	)	-14%	-65%
Net impaired loans	8		21		14		-62%	-43%
Total employees	2,248		2,196		2,040		2%	10%

Core business performance excludes significant items and AIFRS adjustments

March 2006 half year compared to September 2005 half year

Profit after tax increased by 5%. Excluding the impact of exchange rate movements profit increased 1%. A strong result in the Pacific (up 23%) was partly offset by lower equity accounted earnings for PT Panin Bank.

Excluding exchange rate movements the main drivers of the results were:

§ Net interest income increased 7% driven by a 12% growth in lending volumes. Growth in lending was particularly strong in Fiji, Samoa and PNG.

§ Other external operating income reduced 4%. Fee growth of 7% largely in the Cards business in Indonesia was offset by lower equity accounting earnings for PT Panin Bank ($4 million) and a reduction in foreign exchange income ($2 million) from the particularly strong September 2005 half.

§ Operating expenses increased 9% as a result of costs associated with building partner relationships in China and Vietnam, the first full half of operating costs in Cambodia, and additional customer facing staff in the Pacific.

§ Provision for credit impairment reduced by $4 million. The individual provision charge reduced largely as a result of the write-back of provisioning in Fiji.

§ Income tax expense was flat.

March 2006 half year compared to March 2005 half year

Profit after tax increased 18%. Net interest increased 20% driven by 28% growth in lending volumes and 14% growth in deposit volumes. Other operating income increased slightly with strong card and other fee growth and increased foreign exchange revenue being partly offset by reduced equity accounted income from PT Panin. Operating expenses increased 23% largely as a result of advancing the partnership business agenda in Asia and additional customer facing staff in the Pacific. The impact of exchange rate movements was less than 3%.

BUSINESS PERFORMANCE REVIEW (continued)

Non-continuing businesses

Steve Targett

Comprises the London headquartered project finance business, the run-off of New Zealand conduit transactions and certain structured finance transactions that ANZ has exited as part of its de-risking strategy

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	11		36		26		-69%	-58%
Other external operating income	18		-		7		n/a	large
Operating income	29		36		33		-19%	-12%
External operating expenses	-		-		(6	)	n/a	-100%
Net inter business unit expenses	(1	)	(8	)	(10	)	-88%	-90%
Operating expenses	(1	)	(8	)	(16	)	-88%	-94%
Profit before credit impairment and income tax	28		28		17		0%	65%
Provision for credit impairment	8		53		44		-85%	-82%
Profit before income tax	36		81		61		-56%	-41%
Income tax expense and minority interest	(6	)	(18	)	2		-67%	large
Net profit attributable to shareholders of the Company	30		63		63		-52%	-52%
Operating expenses to operating income	3.4	%	22.2	%	48.5	%
Individual provision (charge) credit	3		30		11		-90%	-73%
Net impaired loans	7		45		52		-84%	-87%
Total employees	-		5		9		-100%	-100%

March 2006 half year compared to September 2005 half year

Profit after tax reduced by $33 million (52%). Significant factors affecting the result were:

§ Net interest income reduced by $25 million reflecting a 48% ($0.8 billion) reduction in lending volumes from the September 2005 half.

§ Other operating income of $18 million largely represents a $12 million release of provisions created on the sale of the London headquartered project finance business following the expiry of certain warranties provided to Standard Chartered Bank and a $4 million gain on sale of power assets.

§ Operating expenses reduced by $7 million, with the remaining expenses being legal and restructuring costs associated with the legacy balances in the London headquartered project finance business.

§ Provision for credit impairment credit decreased by $45 million. The individual provision credit in the September 2005 half reflected the net recovery of $30 million on legacy project finance assets. The remainder of the credit impairment credit, $23 million credit in the collective provisions resulted from the significant reduction in risk as the legacy assets matured or were sold.

March 2006 half year compared to March 2005 half year

Profit after tax reduced by $33 million (52%). Operating income reduced by $4 million, with reduced net interest income resulting from a $2.3 billion reduction in lending volumes partly offset by an $11 million increase in other operating income. The $18 million other operating income in the current half was largely from the release of provisions created on the sale of the London headquartered project finance business, whilst the March 2005 half included $4 million profit on the sale of those businesses.

Operating expenses reduced by $15 million with the London headquartered project finance business being sold part way through the March 2005 half. Provision for credit impairment reduced by $36 million. The March 2005 half included a net recovery of $11 million in individual provisions and a $33 million credit in the collective provision charge resulting from the significant reduction in risk as legacy assets matured or were sold through that half.

BUSINESS PERFORMANCE REVIEW (continued)

Group Centre

¨ Group People Capital	¨ Group Strategic Development
¨ Group Risk Management	¨ Group Financial Management
¨ Treasury	¨ Operations, Technology and
	Shared Services

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05	v. Mar 05
	$M		$M		$M		%	%
Net interest income	110		104		81		6%	36%
Other external operating income	22		26		39		-15%	-44%
Operating income	132		130		120		2%	10%
External operating expenses	(377	)	(395	)	(387	)	-5%	-3%
Net inter business unit expenses	275		271		266		1%	3%
Operating expenses	(102	)	(124	)	(121	)	-18%	-16%
Profit before credit impairment and income tax	30		6		(1	)	large	large
Provision for credit impairment	-		-		-		n/a	n/a
Profit before income tax	30		6		(1	)	large	large
Income tax expense and minority interest	(3	)	10		6		large	large
Net profit attributable to shareholders of the Company	27		16		5		69%	large

Including:
Treasury	10		10		9		0%	11%
Total employees	4,098		4,023		3,875		2%	6%

March 2006 half year compared to September 2005 half year

The result for the Group Centre was $27 million profit compared with $16 million in the September 2005 half. Significant influences on the result were:

§ Movements in the average NZD exchange rate resulted in a $9 million after tax increase in income on contracts put in place to hedge NZD denominated earnings. These gains were partly offset in New Zealand Businesses, and the New Zealand component of the Institutional and Esanda (UDC) businesses. The gains on the NZD contracts were partly offset by the maturity of contracts put in place to hedge USD revenues, which resulted in a decline of $6 million after tax.

§ Other operating income decreased $4 million with lower capital investment earnings (net of hedge costs) from INGA. Capital investment hedges were terminated in October 2005.

§ Operating expenses reduced $22 million with lower non-incremental New Zealand businesses System Integration costs and other project costs.

§ Income tax expense increase reflects a tax benefit booked in the prior half in respect of issue costs for the 2 for 11 rights issue, and lower INGA non-taxable Capital investment earnings.

March 2006 half year compared to March 2005 half year

The half year profit of $27 million was $22 million higher than the March 2005 half. Revenue increased $12 million with higher net interest offset by lower capital investment earnings (net of hedge earnings) in INGA following the payment of dividends. External operating expenses reduced 3% with the inclusion of provisioning for cheque conversion fraud in the March 2005 half.

GEOGRAPHIC SEGMENT PERFORMANCE

Geographic performance

	Half	Half	Half	Movt	Movt
	year	year	year	Mar 06	Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05	v. Mar 05
	$M	$M	$M	%	%
Net profit attributable to shareholders of the company
Australia	1,196	1,105	1,043	8%	15%
New Zealand	422	340	355	24%	19%
Asia Pacific	110	101	84	9%	31%
Other	83	74	73	12%	14%
	1,811	1,620	1,555	12%	16%

FOUR YEAR SUMMARY BY HALF YEAR

							Previous AGAAP1
	Mar 06		Sep 05		Mar 05		Sep 04		Mar 04		Sep 03		Mar 03		Sep 02
	$M		$M		$M		$M		$M		$M		$M		$M
Income Statement
Net interest income	3,368		2,953		2,865		2,745		2,507		2,171		2,140		2,053
Other operating income	1,595		1,861		1,717		1,694		1,681		1,456		1,352		1,561
Operating expense	(2,185	)	(2,266	)	(2,152	)	(2,103	)	(1,902	)	(1,626	)	(1,602	)	(1,575	)
Provision for credit impairment	(224	)	(296	)	(284	)	(319	)	(313	)	(311	)	(303	)	(309	)
Profit before income tax	2,554		2,252		2,146		2,017		1,973		1,690		1,587		1,730
Income tax expense	(742	)	(630	)	(590	)	(597	)	(574	)	(482	)	(444	)	(457	)
Minority interest	(1	)	(2	)	(1	)	(1	)	(3	)	(1	)	(2	)	(1	)
Net profit attributable to shareholders of the Company	1,811		1,620		1,555		1,419		1,396		1,207		1,141		1,272

							Previous AGAAP1
	Mar 06		Sep 05		Mar 05		Sep 04		Mar 04		Sep 03		Mar 03		Sep 02
	$M		$M		$M		$M		$M		$M		$M		$M
Income Statement
Net interest income	3,368		3,231		3,140		2,745		2,507		2,171		2,140		2,053
Other operating income	1,563		1,528		1,407		1,694		1,573		1,456		1,352		1,387
Operating expense	(2,259	)	(2,213	)	(2,127	)	(2,103	)	(1,902	)	(1,626	)	(1,602	)	(1,575	)
Provision for credit impairment	(224	)	(325	)	(240	)	(319	)	(313	)	(311	)	(303	)	(309	)
Profit before income tax	2,448		2,221		2,180		2,017		1,865		1,690		1,587		1,556
Income tax expense	(716	)	(636	)	(611	)	(597	)	(550	)	(482	)	(444	)	(453	)
Minority interest	(1	)	(2	)	(1	)	(1	)	(3	)	(1	)	(2	)	(1	)
Cash profit2,7	1,731		1,583		1,568		1,419		1,312		1,207		1,141		1,102
Non-core items2	80		37		(13	)	-		84		-		-		170
Net profit attributable to shareholders of the Company	1,811		1,620		1,555		1,419		1,396		1,207		1,141		1,272
Balance Sheet
Assets	319,363		298,104		282,784		259,345		247,288		195,591		190,518		183,105
Net assets	18,796		19,538		18,927		17,925		16,748		13,787		12,485		11,465

Ratios
Return on average ordinary equity3	20.9	%	18.3	%	18.3	%	17.3	%	19.1	%	20.9	%	20.3	%	24.8	%
Return on average assets	1.2	%	1.1	%	1.1	%	1.1	%	1.2	%	1.2	%	1.2	%	1.4	%
Tier 1 capital ratio	6.8	%	6.9	%	7.0	%	6.9	%	7.0	%	7.7	%	7.7	%	7.9	%
Operating expenses4 to operating income	44.0	%	47.1	%	47.0	%	45.8	%	43.9	%	44.6	%	45.6	%	43.3	%
Core operating expenses4 to operating incom	45.8	%	46.5	%	46.8	%	45.5	%	45.1	%	44.6	%	45.6	%	45.5	%
Shareholder value - ordinary shares
Total return to shareholders
(share price movement plus dividends)	13.2	%	19.2	%	11.3	%	3.0	%	13.6	%	2.5	%	4.1	%	1.4	%
Market capitalisation	48,461		43,834		37,584		34,586		34,284		27,314		27,135		26,544
Dividend	56 cents		59 cents		51 cents		54 cents		47 cents		51 cents		44 cents		46 cents
Franked portion	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%
Share price5
- high	$26.70		$24.45		$22.02		$19.44		$19.40		$18.45		$18.19		$19.70
- low	$22.70		$20.53		$19.02		$17.45		$15.94		$16.66		$15.01		$16.18
- closing	$26.50		$24.00		$20.62		$19.02		$18.96		$17.17		$17.15		$16.88
Share information (per fully paid ordinary share)
Earnings per share - basic5	98.4		86.3		83.2		76.4c		76.8c		73.3c		69.1c		77.7c
Dividend payout ratio	56.9	%	68.4	%	61.3	%	71.0	%	63.8	%	67.0	%	61.3	%	57.0	%
Net tangible assets	$8.00		$7.77		$7.38		$7.51		$6.94		$7.49		$7.32		$6.58
Number of fully paid ordinary shares on issue (millions)	1,828.7		1,826.4		1,822.7		1,818.4		1,808.2		1,521.7		1,513.4		1,503.9
Other information
Permanent employees (FTE)	29,617		29,471		28,388		27,383		26,585		21,586		21,218		21,380
Temporary employees (FTE)	1,446		1,505		1,444		1,372		1,386		1,551		1,265		1,102
Total employees	31,063		30,976		29,832		28,755		27,971		23,137		22,483		22,482
Number of shareholders6	273,503		263,467		255,655		252,072		245,173		223,545		210,512		198,716

FOUR YEAR SUMMARY BY HALF YEAR (continued)

1.	An explanation of the differences between accounting under current AGAAP (AIFRS) as opposed to “previous AGAAP” is set out on pages 11 to 14
2.	ANZ has reduced the September 2005 profit after tax by $46 million (Mar 2005: $15 million increase) to bring the result for that period to an AIFRS basis that is fully comparable with March 2006 figures (refer page 3), allowing readers to see the impact on 2005 results of accounting standards that have only been applied from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability. In the March 2006 half ANZ has classified the $113 million ($79 million after tax) settlement of the NHB insurance matter and the $14 million after tax settlement of warranty claims on Lloyds TSB plc (tax on warranty settlement: $nil) as significant items. In the September 2005 half ANZ classified $14 million after tax profit on the sale of NBNZ life and funds management businesses as a significant item (tax on gain on sale of NBNZ life and funds management businesses: $nil). ANZ excludes significant items to eliminate the distorting effect of one-off transactions on the results of its core business (refer page 11). In the March 2006 half ANZ has classified $13 million after tax profit (Sep 2005: $12 million; Mar 2005 $19 million) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges, ineffective portions of cash flow hedges, profit or loss on disposal of investment securities, and fair value movement in bonds and notes designated at fair value as a non-core item. ANZ excludes volatility associated with fair value movements on these transactions to provide a better indication of the core business performance (tax on hedge gains/losses $5 million (Sep 2005: $4 million; Mar 2005: $8 million)). In the March 2006 half ANZ has incurred $26 million after tax ANZ National Bank incremental integration costs (Sep 2005 half: $35 million; Mar 2005 half: $17 million). Tax on ANZ National Bank incremental integration costs is $13 million (Sep 2005: $18 million; Mar 2005: $8 million). ANZ National Bank incremental integration costs are excluded to better reflect the core cost base and assist analysis of the cost base following completion of the integration (refer page 11)
3.	Average ordinary shareholders’ equity excludes minority interest
4.	Operating expenses excludes goodwill amortisation of $nil (Sep 2005: $nil; Mar 2005: $nil; Sep 2004: $83 million; Mar 2004: $63 million; Sep 2003: $9 million; Mar 2003: $9 million; Sep 2002: $10 million). Under AIFRS goodwill is not amortised and therefore was not recognised from the March 2005 period onwards
5.	September 2003 and prior periods adjusted for the bonus element of the rights issue
6.	Excludes employees whose only ANZ shares are held in trust under ANZ employee share schemes
7.	Refer page 14 for a reconciliation of Net Profit to Cash Profit. Refer page 11 for a discussion of why management believes measures of cash profit provide useful information to investors regarding ANZs financial conditions and results of operations

Australia and New Zealand Banking Group Limited

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AND OTHER DISCLOSURES

(prepared in Australian Dollars ($))

Half year ended
31 March 2006

CONSOLIDATED FINANCIAL STATEMENTS – TABLE OF CONTENTS

CONTENTS		*PAGE*
Consolidated Condensed Income Statement		57
Consolidated Condensed Balance Sheet		58
Consolidated Condensed Statement of Recognised Income and Expense		59
Consolidated Condensed Cash flow statement		60
Notes to Financial Statements		61
1.	Significant Accounting policies	61
2.	Income	67
3.	Operating expenses	68
4.	Income tax expense	69
5.	Dividends	70
6.	Earnings per share	71
7.	Derivative financial instruments	72
8.	Net loans and advances	74
9.	Impaired financial assets	75
10.	Provision for credit impairment	78
11.	Loan capital	79
12.	Share Capital	79
13.	Shareholders’ Equity	80
14.	Capital Management	82
15.	Average balance sheet and related interest - statutory basis	84
16.	Interest spreads and net interest average margins — statutory basis	87
17.	Segment analysis	88
18.	Contingent liabilities and contingent assets	89
19.	Note to the Cash Flow Statement	91
20.	Changes in composition of the Group	92
21.	Associates, joint venture entities and investments	92
22.	Exchange rates	93
23.	Significant events since balance date	93
24.	Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS)	94
25.	US GAAP Reconciliation	109
Definitions		124
Alphabetical Index		126

This page has been left blank intentionally

CONSOLIDATED CONDENSED INCOME STATEMENT

		Half		Half		Half		Movt	Movt
		year		year		year		Mar 06	Mar 06
		Mar 06		Sep 05		Mar 05		v. Sep	v. Mar
		$M		$M		$M		05	05
	Note							%	%
Total income	2	12,372		11,160		10,137		11%	22%
Interest income		10,777		9,299		8,420		16%	28%
Interest expense		(7,409	)	(6,346	)	(5,555	)	17%	33%
Net interest income	2	3,368		2,953		2,865		14%	18%
Other operating income	2	1,595		1,861		1,717		-14%	-7%
Operating income		4,963		4,814		4,582		3%	8%
Operating expenses	3	(2,185	)	(2,266	)	(2,152	)	-4%	2%
Profit before credit impairment and income tax		2,778		2,548		2,430		9%	14%
Provision for credit impairment	10	(224	)	(296	)	(284	)	-24%	-21%
Profit before income tax		2,554		2,252		2,146		13%	19%
Income tax expense	4	(742	)	(630	)	(590	)	18%	26%
Profit for the period		1,812		1,622		1,556		12%	16%
Net profit attributable to minority interest		(1	)	(2	)	(1	)	-50%	0%
Net profit attributable to shareholders of the Company		1,811		1,620		1,555		12%	16%

Earnings per ordinary share (cents)
Basic	6	98.4		86.3		83.2		14%	18%
Diluted	6	96.1		84.3		80.6		14%	19%
Dividend per ordinary share (cents)	5	56		59		51		-5%	10%
Net tangible assets per ordinary share ($)		8.00		7.77		7.38		3%	8%

The notes appearing on pages 61 to 122 form an integral part of these financial statements

CONSOLIDATED CONDENSED BALANCE SHEET

		As at		As at		As at	Movt	Movt
		Mar 06		Sep 05		Mar 05	Mar 06	Mar 06
	Note						v. Sep	v. Mar
		$M		$M		$M	05	05

Assets
Liquid assets		13,870		11,601		8,856	20%	57%
Due from other financial institutions		8,336		6,348		6,428	31%	30%
Trading securities1		8,721		6,285		6,108	39%	43%
Derivative financial instruments	7	7,485		3,730		4,002	large	87%
Available for sale assets2		13,287		10,042		9,586	32%	39%
Net loans and advances	8	241,546		232,490		220,394	4%	10%
Customers’ liability for acceptances		13,692		13,449		12,922	2%	6%
Regulatory deposits		214		159		143	35%	50%
Interests in associates and joint venture entities		1,912		1,926		1,796	-1%	6%
Deferred tax assets		1,460		1,389		1,283	5%	14%
Goodwill and other intangible assets3		3,269		3,454		3,608	-5%	-9%
Other assets4,5		4,510		6,177		6,583	-27%	-31%
Premises and equipment		1,061		1,054		1,075	1%	-1%
Total assets		319,363		298,104		282,784	7%	13%
Liabilities
Due to other financial institutions		13,345		12,027		10,056	11%	33%
Deposits and other borrowings		196,850		190,322		185,177	3%	6%
Derivative financial instruments	7	6,134		4,225		4,987	45%	23%
Liability for acceptances		13,692		13,449		12,922	2%	6%
Income tax liabilities		1,897		1,801		1,705	5%	11%
Payables and other liabilities5		9,697		7,618		7,703	27%	26%
Provisions		908		914		865	-1%	5%
Bonds and notes		46,923		39,073		32,321	20%	45%
Loan capital6	11	11,121		9,137		8,121	22%	37%
Total liabilities		300,567		278,566		263,857	8%	14%
Net assets		18,796		19,538		18,927	-4%	-1%
Shareholders’ equity
Ordinary share capital	12,13	8,068		8,053		7,982	0%	1%
Preference share capital	12,13	871		1,858		1,858	-53%	-53%
Reserves	13	(156	)	(46	)	102	large	large
Retained profits		9,979		9,646		8,967	3%	11%
Share capital and reserves attributable to shareholders of the Company		18,762		19,511		18,909	-4%	-1%
Minority interest		34		27		18	26%	89%
Total shareholders’ equity		18,796		19,538		18,927	-4%	-1%

Contingent liabilities and contingent assets	18

1.	Includes bills held in portfolio $1,167 million (Sep 2005: $1,182 million; Mar 2005: $1,395 million)
2.	In 2005 available for sale assets were reported as investment securities
3.	Excludes notional goodwill in equity accounted entities
4.	Includes interest revenue receivable $1,468 million (Sep 2005: $1,443 million; Mar 2005: $1,522 million)
5.	Other assets includes life insurance assets of $nil (Sep 2005: $nil; Mar 2005: $50 million). Payables and other liabilities includes policy holder liabilities of $nil (Sep 2005: $nil; Mar 2005: $31 million)
6.	Includes $1,536 million (Sep 2005: $1,443 million; Mar 2005: $1,425 million) hybrid loan capital that qualifies for Tier 1 capital as defined by the Australian Prudential Regulation Authority

The notes appearing on pages 61 to 122 form an integral part of these financial statements

CONSOLIDATED CONDENSED STATEMENT OF RECOGNISED INCOME AND EXPENSE

	Half		Half		Half		Movt	Movt
	year		year		year		Mar 06	Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep	v. Mar
							05	05
	$M		$M		$M		%	%

Items recognised directly in equity
Revaluation of investments in controlled entities	-		-		-		n/a	n/a
Currency translation adjustments
Exchange differences taken to equity	(305	)	(159	)	(284	)	92%	7%
Transferred to income statement on sale	-		-		-		n/a	n/a
Available-for-sale assets
Valuation gain (loss) taken to equity	22		-		-		n/a	n/a
Cumulative gain (loss) transferred to the income statement on sale	-		-		-		n/a	n/a
Cash flow hedges
Valuation gain (loss) taken to equity	31		-		-		n/a	n/a
Transferred to income statement for the period	(14	)	-		-		n/a	n/a
Actuarial gain (loss) on defined benefit plans	34		27		8		26%	large
Income tax recognised directly in equity	(16	)	(9	)	(1	)	78%	large
Net loss recognised directly in equity	(248	)	(141	)	(277	)	76%	-10%
Profit for the period	1,811		1,620		1,555		12%	16%
Total recognised income and expense for the period	1,563		1,479		1,278		6%	22%
Total recognised income and expense attributable to minority interest	1		2		1		-50%	0%
Total recognised income and expense attributable to shareholders of the company	1,564		1,481		1,279		6%	22%

The notes appearing on pages 61 to 122 form an integral part of these financial statements

Consolidated Condensed Cash flow statement

		Half		Half		Half
		year		year		year
		Mar 06		Sep 05		Mar 05
		Inflows		Inflows		Inflows
	Note	(Outflows)		(Outflows)		(Outflows)
		$M		$M		$M
Cash flows from operating activities
Interest received		11,179		9,169		8,699
Dividends received		49		106		38
Fee income received		1,016		1,360		943
Other income received		581		861		152
Interest paid		(7,299	)	(6,003	)	(5,411	)
Personnel expenses paid		(1,383	)	(1,285	)	(1,213	)
Premises expenses paid		(188	)	(186	)	(181	)
Other operating expenses paid		(1,244	)	(1,094	)	(1,050	)
Recovery from NHB litigation		87		-		-
Income taxes paid
Australia		(539	)	(294	)	(278	)
Overseas		(82	)	(305	)	(195	)
Net Goods and Services Tax received (paid)		(5	)	24		(6	)
(Increase) decrease in operating assets:
Liquid assets - greater than three months		(1,798	)	(358	)	(370	)
Due from other financial institutions		806		(358	)	(13	)
Trading securities		881		(183	)	(638	)
Regulatory deposits		(47	)	(19	)	24
Loans and advances		(16,502	)	(13,365	)	(15,423	)
Increase (decrease) in operating liabilities
Deposits and other borrowings		8,729		5,802		14,054
Due to other financial institutions		1,159		2,080		2,892
Payables and other liabilities		119		(652	)	(687	)
Net cash provided by operating activities	19	(4,481	)	(4,700	)	1,337
Cash flows from investing activities
Net decrease (increase):
Shares in controlled entities and associates		(62	)	(86	)	243
Available for sale assets
Purchases		(7,657	)	(7,603	)	(9,585	)
Proceeds from sale or maturity		8,217		7,394		10,462
Controlled entities and associates
Purchased (net of cash acquired)		-		(149	)	-
Proceeds from sale (net of cash disposed)		-		144		-
Premises and equipment
Purchases		(153	)	(170	)	(155	)
Proceeds from sale		2		81		5
Other		86		255		(1,975	)
Net cash (used in) investing activities		433		(134	)	(1,005	)
Cash flows from financing activities
Net (decrease) increase
Bonds and notes
Issue proceeds		9,924		9,649		8,319
Redemptions		(4,139	)	(2,396	)	(2,629	)
Loan capital
Issue proceeds		609		1,225		-
Redemptions		-		(93	)	-
Decrease in minority interests		2		8		-
Dividends paid		(989	)	(884	)	(924	)
Share capital issues		75		58		62
Share capital buyback		(146	)	(87	)	(117	)
Euro Hybrid preference share issue		-		-		875
Euro Hybrid issues costs		-		-		(4	)
Net cash provided by financing activities		5,336		7,480		5,582
Net cash (used in) provided by operating activities		(4,481	)	(4,700	)	1,337
Net cash (used in) investing activities		433		(134	)	(1,005	)
Net cash provided by financing activities		5,336		7,480		5,582
Net (decrease)increase in cash and cash equivalents		1,288		2,646		5,914
Cash and cash equivalents at beginning of period		13,702		11,696		7,854
Foreign currency translation on opening balances		1,855		(640	)	(2,072	)
Cash and cash equivalents at end of period	19	16,845		13,702		11,696

The notes appearing on pages 61 to 122 form an integral part of these financial statements

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting policies

(i) Basis of preparation

These consolidated financial statements comprise a general purpose financial report and:

▪ should be read in conjunction with the ANZ Financial Report and the ANZ Concise Annual Report for the year ended 30 September 2005 and any public announcements made by the Parent entity and its controlled entities (the Group) for the half year ended 31 March 2006 in accordance with the continuous disclosure obligations under the Corporations Act 2001 (as amended) and the ASX Listing Rules

▪ are presented in Australian dollars in accordance with class order 98/100 dated 10 July 1998 (millions, except where stated otherwise)

▪ comply with the accounts provisions of the Banking Act 1959, applicable Australian Accounting Standards, the Corporations Act 2001 (as amended), the Corporations Regulations 2001 and other authoritative pronouncements of the Australian Accounting Standards Board (AASB)

▪ are condensed financial statements as defined in AASB 134: ‘Interim Financial Reporting’. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34: ‘Interim Financial Reporting’. This report does not include all notes of the type normally included in the annual financial report

▪ have been prepared in accordance with the historical cost convention except that the following assets and liabilities are stated at their fair value: derivative financial instruments including the fair value of any applicable underlying exposure, assets treated as available-for-sale, financial instruments held for trading, term funding instruments including specific bonds and notes, and defined benefit plans assets and liabilities.

The preparation of the financial report requires the use of management judgement, estimates and assumptions that affect reported amounts and the application of policies. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable. Actual results may differ from these estimates. Such estimates may require review in future periods.

International Financial Reporting Standards (IFRS) form the basis of Australian Accounting Standards issued by the AASB, being Australian equivalents to IFRS (AIFRS). The Group revised its accounting policies on 1 October 2005 to enable the preparation of financial statements that comply with AIFRS. This is the Group’s first financial report prepared in accordance with AIFRS and AASB 1: ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’ has been applied. An explanation of how the transition from superseded policies to AIFRS has impacted the Group’s reported financial position, financial performance and cash flow, is set out in Note 24.

The accounting policies have been consistently applied by all consolidated entities and to all periods presented in the consolidated financial report and the opening AIFRS balance sheet as at 1 October 2004, except for those policies relating to Standards for which comparatives are not restated, as permitted under the first time adoption transitional provisions. The Standards are AASB 132: ‘Financial Instruments: Presentation and Disclosure’, AASB 139: ‘Financial Instruments: Recognition and Measurement’, and AASB 4: ‘Insurance Contracts’.

The Group’s key accounting policies that have been amended by the adoption of AIFRS follow.

(ii) Consolidation

The financial statements consolidate the financial statements of Australia and New Zealand Banking Group Limited (the Company) and all its subsidiaries where it is determined that there is a capacity to control. Control means the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

On adoption of AIFRS certain special purpose entities in which the Group holds less than a majority of voting rights, were deemed to be controlled entities where:

▪ in substance, the majority of the risks and rewards from their activities accrue to the Group; or

▪ in substance, the Group controls their decision making powers so as to obtain the majority of the risks and rewards from their activities.

(iii) Interest income and interest expense

Interest income and interest expense are recognised in the income statement as they accrue using the effective interest method.

Fee income and directly related transaction costs relating to loan origination, financing or restructurings are now deferred and amortised to interest income over the expected life of the loan using the effective interest method.

Loan commitment fees, together with related direct costs, are deferred and recognised as an adjustment to the interest yield on the loan once drawn or immediately to the income statement for expired commitments.

Fees and commissions payable to brokers in respect of originating lending business, where these are incremental costs directly related to the issue of a financial instrument, are included in interest income as part of the effective interest rate.

NOTES TO FINANCIAL STATEMENTS (continued)

1. Significant Accounting policies, cont’d

(iv) Fee and commission income

Unless included in the effective interest calculation (refer 1(iii)), fees and commissions are brought to account on an accrual basis.

Fees and commissions that relate to the execution of a significant act (for example, advisory services, placement fees and underwriting fees) are recognised when the significant act has been completed.

Fees charged for providing ongoing services that represent the recoupment of the costs of providing service (for example, maintaining and administering existing facilities) are recognised as income over the period the service is provided.

(v) Offsetting of income and expenses

Income and expenses are not offset unless required or permitted by an accounting standard. At the Group level, this generally arises in the following circumstances:

▪ where transaction costs, which are an integral part of the effective interest rate of a financial instrument measured at amortised cost, are offset against the interest income generated by the financial instrument

▪ where gains and losses relating to fair value hedges are assessed as being effective

▪ where gains and losses from a group of similar transactions are reported on a net basis, such as foreign exchange gains and losses, or

▪ where amounts are collected on behalf of third parties, where the Group is acting as an agent.

(vi) Cash receipts on impaired loans

Cash receipts on impaired loans are applied as a reduction to principal.

(vii) Derivative financial instruments

Derivative financial instruments are contracts whose value is derived from one or more underlying financial instruments or indices.

Derivative financial instruments including swaps, forward rate agreements, futures, options and combinations of these instruments are entered into by the Group for trading purposes, including customer-related reasons, or for hedging purposes where the derivative instruments are used to hedge the Group’s exposures to interest rate risk, currency risk, price risk, credit risk and other exposures relating to non-trading positions.

Derivative financial instruments are recognised initially at fair value with gains or losses from subsequent remeasurement at fair value being recognised in the income statement. Where the derivative is designated and effective as a hedging instrument, the timing of the recognition of any resultant gain or loss in the income statement is dependent on the hedging designation. These hedging designations and associated accounting treatments are as follows:

▪ Fair value hedge

Where the Group hedges the fair value of a recognised asset or liability or firm commitment, changes in the fair value of derivatives designated as a fair value hedge are recognised in the income statement. Changes in the fair value of the hedged item attributable to the hedged risk are reflected as adjustments to the carrying value of the hedged items, which are also recognised in the income statement.

Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. The resulting adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to the income statement over the period to maturity.

If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immediately in the income statement.

▪ Cash flow hedge

The Group designates derivatives as cash flow hedges where the instrument hedges the variability in cash flows of a recognised asset or liability, a foreign exchange component of a firm commitment or a highly probable forecast transaction. The effective portion of changes in the fair value of derivatives qualifying and designated as cash flow hedges is deferred to the cash flow hedging reserve which forms part of shareholders’ equity. Any ineffective portion is recognised immediately in the income statement. Amounts deferred in equity are recognised in the income statement in the period during which the hedged forecast transactions take place.

When the hedge expires, is sold, terminated, exercised, or no longer qualifies for hedge accounting, the cumulative amount deferred in equity remains in the cash flow hedging reserve, and is subsequently transferred to the income statement when the hedged item is recognised in the income statement.

When a forecast transaction is no longer expected to occur, the amount deferred in equity is recognised immediately in the income statement.

NOTES TO FINANCIAL STATEMENTS (continued)

1. Significant Accounting policies, cont’d

(vii) Derivative financial instruments, cont’d

▪ Net investment hedge

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. The gain or loss from remeasuring the fair value of the hedging instrument relating to the effective portion of the hedge is deferred in equity and the ineffective portion is recognised immediately in the income statement. Amounts deferred in the foreign currency translation reserve are recognised in the income statement when the foreign operation is disposed of.

All gains and losses from changes in the fair value of derivatives, that are not designated in a hedging relationship but are entered into to manage the interest rate and foreign exchange risk of funding instruments, are recognised in the income statement. The component of the fair value change in the derivative and which relates to current period realised and unrealised interest, is included in net interest income. The remainder of the fair value movement is included in other income.

Embedded derivatives - Derivatives embedded in financial instruments or other host contracts are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contracts, and the host contracts are not measured at fair value. The embedded derivative is reported at fair value with changes in fair value immediately recognised in the income statement.

(viii) Trading Securities and other financial assets at fair value through profit or loss

Trading securities and other financial instruments acquired principally for the purpose of selling in the short-term or which are part of a portfolio which is managed for short-term gains are recognised in the balance sheet at their fair value. Additionally, this valuation basis is used as an alternative to hedge accounting for certain financial instruments. It is not used for illiquid instruments or those for which the demonstrated variability in the range of fair value estimates is other than low.

Changes in the fair value (gains or losses) of financial instruments are recognised in the income statement in the period in which they occur.

(ix) Available-for-sale assets

Available-for-sale assets comprise non-derivative financial assets which the Group designates as available-for-sale but which are not deemed to be held principally for trading purposes, and include equity investments, certain loans and advances and fixed term securities. They are initially recorded at fair value plus transaction costs. Subsequent gains or losses arising from changes in fair value are included as a separate component of equity, the ‘available-for-sale revaluation reserve’. When an available-for-sale asset is sold, the cumulative gain or loss relating to the asset is transferred from equity to the income statement.

Where there is objective evidence of impairment to an available-for-sale asset, the cumulative loss related to that asset is removed from equity and recognised in the income statement. If, in a subsequent period, the amount of an impairment loss relating to an available-for-sale debt instrument decreases and the decrease can be linked objectively to an event occurring after the impairment event, the loss is reversed through the income statement.

Premiums and discounts are included within the calculation of the fair value of the security. Interest and dividend income is accrued.

Financial assets previously disclosed as investment securities are now predominantly treated as available-for-sale securities.

(x) Impairment of loans and advances

Loans and advances are regularly reviewed for impairment loss.

Credit impairment provisions are raised for exposures that are known to be impaired. Loans are impaired and impairment losses incurred if there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the loan and that loss event or events has had a reliably estimable impact on the estimated future cash flows of the individual loan or the collective portfolio of loans.

Impairment is assessed firstly for assets that are individually significant (or on a portfolio basis for small value loans), and then on a collective basis for those exposures not individually known to be impaired.

For those exposures that are assessed collectively, these are placed in pools of similar assets with similar risk characteristics. The required provision is estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the collective pool. The historical loss experience is adjusted based on current observable data.

NOTES TO FINANCIAL STATEMENTS (continued)

1. Significant Accounting policies, cont’d

(x) Impairment of loans and advances, cont’d

The estimated impairment loss is measured as the difference between the asset’s carrying amount and the estimated future cash flows discounted to their present value. As this discount unwinds during the period between recognition of impairment and recovery of the written down amount, it is recognised in net interest income. The process of estimating the amount and timing of cash flows involves considerable management judgement. These judgements are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

The provision for impairment loss (individual and collective), referred to as “Provision for credit impairment”, is deducted from loans and advances in the balance sheet and the movement in the provision for the reporting period is reflected in the income statement. When a loan is uncollectible, it is written-off against the related provision for loan impairment. Subsequent recoveries of amounts previously written off are taken to the income statement.

Where impairment losses recognised in previous periods are subsequently decreased or no longer exist, such impairments are reversed in the income statement.

(xi) Goodwill and other intangible assets

▪ Goodwill

Goodwill, representing the excess of the purchase consideration over the fair value of the identifiable net assets of a controlled entity at the date of gaining control, is recognised as an asset and not amortised, but tested for impairment annually and when the goodwill is impaired the difference is charged to the income statement.

Any impairment of goodwill cannot be subsequently reversed.

▪ Other intangible assets

Other intangible assets comprise costs incurred in acquiring and building software and computer systems (“software”).

Software is amortised using the straight-line method over its expected useful life to the Group. The period of amortisation is between 3 and 5 years except for branch front-end applications where 7 years is used.

At each reporting date, software assets are reviewed for impairment. If any such indication exists, the recoverable amount of the assets are estimated and compared against the existing carrying value. Where the existing carrying value exceeds the recoverable amount, the difference is charged to the income statement.

Costs incurred in planning or evaluating software proposals, or in maintaining systems after implementation, are not capitalised.

(xii) Premises and equipment impairment assessment

At each reporting date, the carrying amounts of premises and equipment are reviewed for impairment. If any such indication exists, the recoverable amount of the assets are estimated and compared against the existing carrying value. Where the existing carrying value exceeds the recoverable amount, the difference is charged to the income statement. If it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

A previously recognised impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

(xiii) Employee benefits

The directors have elected under s334(5) of the Corporations Act 2001 to early adopt the December 2004 revision of Australian Accounting Standard AASB 119: ‘Employee Benefits’.

▪ Defined benefit superannuation schemes

The Group operates a number of defined benefit schemes. The liability and expense related to providing benefits to employees under each defined benefit scheme are calculated by independent actuaries. Initially, a defined benefit liability is recognised to the extent that the present value of the defined benefit obligation of each scheme, calculated using the Projected Unit Credit Method, is greater than the fair value of each scheme’s assets. Where this calculation results in a benefit to the Group, a defined benefit asset is recognised. In each subsequent reporting period, ongoing movements in the defined benefit liability or asset carrying value are treated as follows:

- net movement relating to the current period’s service cost, interest cost, expected return on scheme assets, past service costs and other costs (such as the effects of any curtailments and settlements), is recognised as an employee expense in the income statement

- movements relating to actuarial gains and losses are recognised directly in retained earnings

- contributions incurred are recognised directly against the net defined benefit position.

NOTES TO FINANCIAL STATEMENTS (continued)

1. Significant Accounting policies, cont’d

(xiii) Employee benefits, cont’d

▪ Share-based compensation

The Group has various equity settled share-based compensation plans. These are described in Note 49 of the 2005 annual financial report and largely comprise the Employee Share Acquisition Plan and the ANZ Share Option Plan.

ANZ ordinary shares

The fair value of ANZ ordinary shares granted under the Employee Share Acquisition Plan is measured at grant date, using the one-day volume weighted average market price of ANZ shares. The fair value is expensed immediately when shares vest immediately or on a straight-line basis where shares vest over the relevant vesting period. This is recognised as an employee compensation expense with a corresponding increase in equity.

Share options

The fair value of share options is measured at grant date, using an option pricing model. The fair value is expensed on a straight-line basis over the relevant vesting period. This is recognised as an employee compensation expense with a corresponding increase in the share options reserve. The option pricing model takes into account the exercise price of the option, the risk free interest rate, the expected volatility of ANZ ordinary share price and other factors. Market vesting conditions are taken into account in estimating the fair value.

Performance rights

From October 2005, ANZ has granted performance Rights to certain employees. A Performance Right is a right to acquire a share at nil cost to the employee, subject to satisfactorily meeting time and performance hurdles. Upon exercise, each Performance Right entitles the holder to one ordinary share in ANZ. The fair value of Performance Rights is determined at grant date using an option pricing model, taking into account market conditions. The fair value is expensed over the relevant vesting period. This is recognised as an employee expense with a corresponding increase in equity.

Other adjustments

The amount of expense recognised during the vesting period is adjusted for the number of shares, options or performance rights expected to vest. Non-market vesting conditions (eg service conditions) are taken into account, so that ultimately the expense recognised in the income statement reflects the number of shares or share options that actually vest.

(xiv) Offsetting of assets and liabilities

Assets and liabilities are offset and the net amount reported in the balance sheet only where:

§ there is a current enforceable legal right to offset the asset and liability, and

§ there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

(xv) Income tax

▪ Income tax expense

Income tax on earnings for the period comprises current and deferred tax and is based on the applicable tax law in each jurisdiction. It is recognised in the income statement as tax expense, except when it relates to items credited directly to equity, in which case it is recorded in equity, or where it arises from the initial accounting for a business combination, in which case it is included in the determination of goodwill.

▪ Current tax

Current tax is the expected tax payable on taxable income for the period, based on tax rates (and tax laws) which are enacted or substantively enacted by the reporting date, including any adjustment for tax payable in previous periods. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

▪ Deferred tax

Deferred tax is accounted for using the comprehensive tax balance sheet liability method. It is generated by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes, and the amounts used for taxation purposes.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement reflects the tax consequences that would follow from the manner in which the Group, at the reporting date, recovers or settles the carrying amount of its assets and liabilities.

NOTES TO FINANCIAL STATEMENTS (continued)

1. Significant Accounting policies, cont’d

(xv) Income tax, cont’d

Deferred tax liabilities are recognised for all taxable temporary differences, other than those in relation to taxable temporary differences arising from goodwill. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in controlled entities, branches, associates and joint ventures, except where the Group is able to control the reversal of the temporary differences and it is probable that temporary differences will not reverse in the foreseeable future. Deferred tax assets associated with these interests are recognised only to the extent that it is probable that the temporary difference will reverse in the foreseeable future and there will be sufficient taxable profits against which to utilise the benefits of the temporary difference.

Deferred tax assets, including those related to the tax effects of income tax losses and credits available to be carried forward, are recognised only to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences or unused tax losses and credits can be utilised.

▪ Offsetting

Current and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same taxation authority and there is a legal right and intention to settle on a net basis and it is allowed under the tax law of the relevant jurisdiction.

(xvi) Change in accounting policy

In the current reporting period the Group has adopted AASB 132: ‘Financial Instruments: Presentation and Disclosure’, AASB 139: ‘Financial Instruments: Recognition and Measurement’ and AASB 4: ‘Insurance Contracts’. This change in accounting policy has been adopted in accordance with the transitional rules contained in AASB 1, which does not require the restatement of comparative information for financial instruments within the scope of AASB 132, AASB 139 and AASB 4. The impact of this change in accounting policy in the current reporting period is detailed in Note 24.

NOTES TO FINANCIAL STATEMENTS (continued)

2. Income

							Movt		Movt
	Half		Half		Half		Mar 06		Mar 06
	year		year		year		v. Sep		v. Mar
	Mar 06		Sep 05		Mar 05		05		05
	$M		$M		$M		%		%
Net interest income
Interest income	10,777		9,299		8,420		16	%	28	%
Interest expense	(7,409	)	(6,346	)	(5,555	)	17	%	33	%
Net interest income	3,368		2,953		2,865		14	%	18	%

i) Fee and commission income
Lending fees1	215		535		508		-60	%	-58	%
Non-lending fees and commissions	939		931		869		1	%	8	%
Total fee and commission income	1,154		1,466		1,377		-21	%	-16	%
Fee and commission expense2	(125	)	(115	)	(117	)	9	%	7	%
Net fee and commission income	1,029		1,351		1,260		-24	%	-18	%
ii) Other income
Foreign exchange earnings	227		233		222		-3	%	2	%
Net gains/(losses) from trading securities	17		40		(7	)	-58	%	large
Net gains/(losses) from trading derivatives	127		54		47		large		large
Other financial instruments3	18		-		-		n/a		n/a
Settlement of NBNZ warranty claims	14		-		-		n/a		n/a
Net profit before tax from the sale of NBNZ Life	-		14		-		-100	%	n/a
Share of joint venture profit from ING Australia	57		69		80		-17	%	-29	%
Share of joint venture profit from ING (NZ)4	11		-		-		n/a		n/a
Share of associates profit (net of write-offs)	18		20		27		-10	%	-33	%
Private Equity and Infrastructure earnings5	10		5		17		100	%	-41	%
Other	67		75		71		-11	%	-6	%
Total other income	566		510		457		11	%	24	%
Total other operating income	1,595		1,861		1,717		-14	%	-7	%
Total income	12,372		11,160		10,137		11	%	22	%
Profit before income tax as a % of total income	20.64	%	20.18	%	21.17	%

1.		Lending fees in 2006 excludes fees included as part of the effective yield calculation
2.		Comprises interchange fees paid
3.		Includes any fair value movements (excluding realised and unrealised interest) on derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges, ineffective portions of cash flow hedges, profit or loss on disposal of investment securities, and fair value movement in bonds and notes designated at fair value
4.		A joint venture entity from 30 September 2005
5.		Includes earnings from private equity and infrastructure portfolios. Includes share of associates’ profit $4 million (Sep 2005 half: $4 million; Mar 2005 half: $1 million) not included in share of associates’ profit above

NOTES TO FINANCIAL STATEMENTS (continued)

3. Operating expenses

					Movt		Movt
	Half		Half	Half	Mar 06		Mar 06
	year		year	year	v. Sep		v. Mar
	Mar 06		Sep 05	Mar 05	05		05
	$M		$M	$M	%		%
Personnel
Employee entitlements and taxes	106		103	87	3	%	22	%
Salaries and wages	872		832	793	5	%	10	%
Superannuation costs - defined benefit plans	4		9	7	-56	%	-43	%
Superannuation costs - defined contribution plans	80		72	71	11	%	13	%
Equity-settled share -based payments	38		39	41	-3	%	-7	%
Temporary staff	64		62	49	3	%	31	%
Other	199		192	171	4	%	16	%
Total personnel expenses	1,363		1,309	1,219	4	%	12	%
Premises
Depreciation and amortisation	16		14	13	14	%	23	%
Rent	113		108	105	5	%	8	%
Utilities and other outgoings	64		62	60	3	%	7	%
Other	13		16	16	-19	%	-19	%
Total premises expenses	206		200	194	3	%	6	%
Computer
Computer contractors	24		34	19	-29	%	26	%
Data communications	28		29	31	-3	%	-10	%
Depreciation and amortisation	104		120	115	-13	%	-10	%
Rentals and repairs	35		35	23	0	%	52	%
Software purchased	53		58	57	-9	%	-7	%
Other	20		19	18	5	%	11	%
Total computer expenses	264		295	263	-11	%	0	%
Other
Advertising and public relations	80		82	79	-2	%	1	%
Audit fees	3		4	3	-25	%	0	%
Depreciation of furniture and equipment	23		20	23	15	%	0	%
Freight and cartage	23		23	22	0	%	5	%
Non-lending losses, frauds and forgeries	36		22	40	64	%	-10	%
Settlement of NHB insurance claim	(113	)	-	-	n/a		n/a
Postage and stationery	57		57	56	0	%	2	%
Professional fees	61		62	61	-2	%	0	%
Telephone	28		25	30	12	%	-7	%
Travel	65		69	55	-6	%	18	%
Other	61		76	77	-20	%	-21	%
Total other expenses	324		440	446	-26	%	-27	%
Restructuring	28		22	30	27	%	-7	%
Operating expenses1	2,185		2,266	2,152	-4	%	2	%

Includes ANZ National Bank incremental integration costs $39 million (Sep 2005 half: $53 million; Mar 2005 half: $25 million) refer page 11

NOTES TO FINANCIAL STATEMENTS (continued)

4. Income tax expense

							Movt		Movt
	Half		Half		Half		Mar 06		Mar 06
	year		year		year		v. Sep		v. Mar
	Mar 06		Sep 05		Mar 05		05		05
	$M		$M		$M		%		%
(a) Reconciliation of the prima facie income tax expense on pre-tax profit with the income tax expense charged in the Income Statement
Operating profit before income tax	2,554		2,252		2,146		13	%	19	%
Prima facie income tax expense at 30%	766		676		644		13	%	19	%
Tax effect of permanent differences:
Overseas tax rate differential	16		10		12		60	%	33	%
Rebateable and non-assessable dividends	(3	)	(9	)	(14	)	-67	%	-79	%
Other non-assessable income	(5	)	(17	)	(15	)	-71	%	-67	%
Profit from associated and joint venture entities	(26	)	(27	)	(32	)	-4	%	-19	%
Life insurance accounting	-		(2	)	(3	)	-100	%	-100	%
Other	(6	)	(1	)	-		large		n/a
	742		630		592		18	%	25	%
Income tax under/ (over) provided in previous years	-		-		(2	)	n/a		-100	%
Total income tax expense on operating profit	742		630		590		18	%	26	%
Australia	474		422		381		12	%	24	%
Overseas	268		208		209		29	%	28	%
	742		630		590		18	%	26	%
Effective Tax Rate - Group	29.1	%	28.0	%	27.5	%
Tax expense comprises:
Current tax expense	846		591		453		43	%	87	%
Deferred tax expense	(104	)	39		137		large		large
	742		630		590		18	%	26	%

NOTES TO FINANCIAL STATEMENTS (continued)

5. Dividends

Ordinary Shares

	Half		Half		Half		Movt		Movt
	year		year		year		Mar 06		Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep		v. Mar
							05		05
							%		%
Dividend per ordinary share1 (cents)
Interim (fully franked)	56		n/a		51		n/a		10	%
Final (fully franked)	n/a		59		n/a		n/a		n/a

Ordinary share dividend1,2
Interim dividend paid	-		930		-		-100	%	n/a
Final dividend paid	1,078		-		983		n/a		10	%
Bonus option plan adjustment3	(18	)	(17	)	(19	)	6	%	-5	%
Total	1,060		913		964		16	%	10	%
Ordinary share dividend payout ratio4 (%)	56.9	%	68.4	%	61.3	%

1.		Excludes preference share dividend
2.		Dividends recorded when determined
3.		This relates to prior period dividend payments
4.		Dividend payout ratio calculated using proposed interim dividend of $1,024 million not included in the above table. Dividend payout ratio for the September 2005 half year calculated using $1,078 million dividends paid in the March 2006 half. Dividend payout ratio for March 2005 half year calculated using $930 million dividends paid in the September 2005 half

Preference Shares

	Half	Half	Half	Movt		Movt
	year	year	year	Mar 06		Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05		v. Mar 05
	$M	$M	$M	%		%
Preference share dividend
ANZ StEPS1	-	34	32	-100	%	-100	%
Euro Hybrid	12	12	6	0	%	100	%
	12	46	38	-74	%	-68	%

Dividend per preference share
ANZ StEPS (AUD)2	-	$3.40	$3.18	n/a		n/a
Euro Hybrid (EUR)	€14.86	€14.22	€7.23	5	%	large

1.		Under AIFRS, the ANZ StEPS issue is treated as debt, with distributions being reported as an interest expense in the half year ended 31 March 2006
2.		Represents the equivalent dividend per share on distributions made

NOTES TO FINANCIAL STATEMENTS (continued)

6. Earnings per share

	Half	Half	Half	Movt		Movt
	year	year	year	Mar 06		Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep		v. Mar
				05		05
				%		%
Number of fully paid ordinary shares on issue (M)	1,828.7	1,826.4	1,822.7	0	%	0	%
Basic
Net profit attributable to shareholders of the Company ($M)	1,811	1,620	1,555	12	%	16	%
Less Preference share dividends ($M)	12	46	38	-74	%	-68	%
Net profit excluding preference share dividends ($M)	1,799	1,574	1,517	14	%	19	%
Weighted average number of ordinary shares (M)	1,828.4	1,824.7	1,822.7	0	%	0	%
Basic earnings per share (cents)	98.4	86.3	83.2	14	%	18	%
Diluted
Net profit excluding preference share dividends ($M)	1,799	1,574	1,517	14	%	19	%
Interest on US Trust securities1 ($M)	29	25	23	16	%	26	%
Interest on ANZ StEPS2 ($M)	33	34	32	-3	%	3	%
Net profit attributable to shareholders of the Company excluding	1,861	1,633	1,572	14	%	18	%
interest on US Trust securities and ANZ StEPS ($M)
Adjusted weighted average number of shares on issue (M)	1,828.4	1,824.7	1,822.7	0	%	0	%
Weighted average number of convertible options (M)	11.9	9.3	7.7	28	%	55	%
Weighted average number of convertible US Trust securities at current market price1 (M)	58.0	60.1	69.1	-3	%	-16	%
Weighted average number of convertible ANZ StEPS securities	38.7	42.7	49.7	-9	%	-22	%
Adjusted weighted average number of shares - diluted (M)	1,937.0	1,936.8	1,949.2	0	%	-1	%
Diluted earnings per share (cents)	96.1	84.3	80.6	14	%	19	%

1.		The US Stapled Trust securities issued on 27 November 2003 mandatorily convert to ordinary shares in 2053 unless redeemed or bought back prior to that date. The US Stapled Trust Security issue can be de-stapled and the investor left with coupon paying preference shares at ANZ’s discretion at any time, or at the investor’s discretion under certain circumstances. AASB 133 requires that potential ordinary shares for which conversion to ordinary share capital is mandatory must be included in the calculation of diluted EPS. The inclusion of this issue in EPS increased the diluted number of shares by 58.0 million

2.		ANZ StEPS (issued on 23 September 2003) converts to either $100 for each ANZ StEPS share or a number of ordinary shares calculated at the market price of ANZ ordinary shares less 2.5%. ANZ StEPS has been included for the first time in dilutive EPS in 2005 due to the adoption of AIFRS. The inclusion of this issue in EPS increased the dilutive number of shares by 38.7 million

NOTES TO FINANCIAL STATEMENTS (continued)

7. Derivative financial instruments

Derivatives

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices. They include swaps, forward rate contracts, futures, options and combinations of these instruments. The use of derivatives and their sale to customers as risk management products is an integral part of the Group’s trading activities. Derivatives are also used to manage the Group’s own exposure to fluctuations in exchange and interest rates as part of its asset and liability management activities. Derivatives are subject to the same types of credit and market risk as other financial instruments, and the Group manages these risks in a consistent manner.

The following table provides an overview of the Group’s exchange rate, interest rate, commodity and credit derivatives. It includes all contracts, both trading and hedging.

Notional principal amount is the face value of the contract and represents the volume of outstanding transactions. Credit equivalent amount is calculated in accordance with the APRA capital adequacy guidelines and combines the aggregate value of all contracts in a positive market position plus an allowance for the potential increase in value over the remaining term of the transaction. Fair value is the net position of contracts with positive market values and negative market values.

	As at 31 March 2006
							Fair Value
	Notional	Credit
	Principal	equivalent	Trading6				Hedging			Total fair value of derivatives
	amount	amount	Assets		Liabilities		Assets	Liabilities		Assets		Liabilities
	$M	$M	$M		$M		$M	$M		$M		$M
Foreign exchange and commodities contracts
Spot and forward contracts	239,291	5,406	3,405		(2,743	)	216	(10	)	3,621		(2,753	)
Swap agreements4	100,384	5,938	2,375		(156	)	177	(270	)	2,552		(426	)
Futures contracts1	466	n/a	18		(28	)	-	-		18		(28	)
Options purchased	11,635	373	229		-		-	-		229		-
Options sold2	15,671	n/a	-		(198	)	-	-		-		(198	)
Other contracts	7,723	1,283	926		(823	)	-	-		926		(823	)
Collateral5	-	-	(1,942	)	543		-	-		(1,942	)	543
	375,170	13,000	5,011		(3,405	)	393	(280	)	5,404		(3,685	)
Interest rate contracts
Forward rate agreements	71,743	8	3		(4	)	-	-		3		(4	)
Swap agreements4	481,229	4,394	1,601		(1,687	)	105	(433	)	1,706		(2,120	)
Futures contracts1	78,404	n/a	168		(165	)	2	-		170		(165	)
Options purchased	21,021	106	78		-		-	-		78		-
Options sold2	44,136	n/a	-		(33	)	-	-		-		(33	)
	696,533	4,508	1,850		(1,889	)	107	(433	)	1,957		(2,322	)
Credit Contracts
Credit default swaps3	19,873	2,845	121		(124	)	3	(3	)	124		(127	)
Total	1,091,576	20,353	6,982		(5,418	)	503	(716	)	7,485		(6,134	)

1.		Credit equivalent amounts have not been included as there is minimal credit risk associated with exchange traded futures where the clearing house is the counterparty
2.		Options sold have no credit exposures as they represent obligations rather than assets
3.		Credit default swaps include structured transactions that expose the Group to the performance of certain assets. The total investment of the Group in these transactions is USD 250 million (Sep 2005:USD 500 million)
4.		The fair value of swap agreements includes internal allocations between Trading and Hedging
5.		Collateral relates predominantly to Foreign Exchange contracts
6.		Includes derivatives entered into to manage interest rate and foreign exchange risk on funding instruments, not designated as accounting hedges

NOTES TO FINANCIAL STATEMENTS (continued)

7. Derivative financial instruments, cont’d

The following table excludes the impact of AASB 132 and AASB 139. As such the data in the table is not on a comparable basis to 31 March 2006 data. This data has been adjusted to reflect the impact of derivatives in securitisation vehicles that were consolidated from 1 October 2004 on adoption of AIFRS.

	As at 30 September 2005
	Notional	Credit	Fair value
	Principal	equivalent
	amount	amount	Assets		Liabilities
	$M	$M	$M		$M
Foreign exchange and commodities contracts
Spot and forward contracts	184,958	3,082	1,416		(1,829	)
Swap agreements4	69,212	3,820	864		(1,610	)
Futures contracts1	256	n/a	18		(14	)
Options purchased	9,340	315	186		-
Options sold2	14,925	n/a	-		(174	)
Other contracts	4,963	573	377		(379	)
Collateral5	-	-	(499	)	1,085
	283,654	7,790	2,362		(2,921	)
Interest rate contracts
Forward rate agreements	47,734	8	5		(4	)
Swap agreements	405,152	3,443	1,624		(1,193	)
Futures contracts1	35,111	n/a	152		(144	)
Options purchased	12,810	96	62		-
Options sold2	16,715	n/a	-		(42	)
	517,522	3,547	1,843		(1,383	)
Credit Contracts
Credit default swaps3	15,437	2,929	117		(118	)
Total	816,613	14,266	4,322		(4,422	)

1-5. Refer footnotes on page 72

NOTES TO FINANCIAL STATEMENTS (continued)

8. Net loans and advances

	Half		Half		Half		Movt		Movt
	year		year		year		Mar 06		Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05		v. Mar 05
	$M		$M		$M		%		%
Australia
Overdrafts	5,780		5,276		5,101		10	%	13	%
Credit card outstandings	5,904		5,434		4,853		9	%	22	%
Term loans - housing	96,846		91,196		86,421		6	%	12	%
Term loans - non-housing	50,873		48,893		46,299		4	%	10	%
Lease finance	2,774		2,854		2,737		-3	%	1	%
Other	9,795		9,636		9,118		2	%	7	%
	171,972		163,289		154,529		5	%	11	%

New Zealand
Overdrafts	1,677		1,647		1,683		2	%	0	%
Credit card outstandings	1,033		1,026		1,043		1	%	-1	%
Term loans - housing	34,961		34,859		33,123		0	%	6	%
Term loans - non-housing	25,103		25,012		23,549		0	%	7	%
Lease finance	361		639		508		-44	%	-29	%
Other	901		1,207		1,150		-25	%	-22	%
	64,036		64,390		61,056		-1	%	5	%

Overseas markets
Overdrafts	434		303		339		43	%	28	%
Credit card outstandings	184		134		126		37	%	46	%
Term loans - housing	693		592		519		17	%	34	%
Term loans - non-housing	8,051		7,510		7,219		7	%	12	%
Lease finance	217		217		201		0	%	8	%
Other	156		69		303		large		-49	%
	9,735		8,825		8,707		10	%	12	%
Total gross loans and advances	245,743		236,504		224,292		4	%	10	%
Less provisions for credit impairment (refer note 10)2	(2,219	)	(2,440	)	(2,401	)	-9	%	-8	%
Less Income yet to mature1	(1,978	)	(1,574	)	(1,497	)	26	%	32	%
	(4,197	)	(4,014	)	(3,898	)	5	%	8	%
Total net loans and advances1	241,546		232,490		220,394		4	%	10	%

1.		Includes fees and expenses capitalised and amortised using the effective interest method of $364 million (Sep 2005: $nil; Mar 2005: $nil)
2.		The provisions for credit impairment were recalculated under AIFRS for 31 March 2006. Refer to Note 24 for discussion of change

The following table shows gross loans and advances for New Zealand in NZD terms.

	Half	Half	Half	Movt		Movt
	year	year	year	Mar 06		Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05		v. Mar 05
	NZD M	NZD M	NZD M	%		%
New Zealand
Overdrafts	1,962	1,811	1,834	8	%	7	%
Credit card outstandings	1,209	1,128	1,137	7	%	6	%
Term loans - housing	40,904	38,339	36,101	7	%	13	%
Term loans - non-housing	29,371	27,509	25,666	7	%	14	%
Lease finance	422	703	554	-40	%	-24	%
Other	1,054	1,326	1,253	-21	%	-16	%
	74,922	70,816	66,545	6	%	13	%

NOTES TO FINANCIAL STATEMENTS (continued)

9. Impaired financial assets

Impaired loan data in 2005 in the following table includes loans that were classified as non-accrual loans.

	As at		As at		As at		Movt		Movt
	Mar 06		Sep 05		Mar 05		Mar 06		Mar 06
							v. Sep 05		v. Mar 05
	$M		$M		$M		%		%
Summary of impaired financial assets
Impaired loans	726		642		640		13	%	13	%
Restructured loans	-		28		30		-100	%	-100	%
Unproductive facilities	76		43		77		77	%	-1	%
Gross impaired financial assets	802		713		747		12	%	7	%
Less individual provisions:
Impaired loans	(305	)	(256	)	(314	)	19	%	-3	%
Unproductive facilities	(11	)	(17	)	(7	)	-35	%	57	%
Net impaired financial assets	486		440		426		10	%	14	%
Impaired loans
Impaired loans	726		642		640		13	%	13	%
Individual provisions	(305	)	(256	)	(314	)	19	%	-3	%
Total net impaired loans	421		386		326		9	%	29	%
Before individual provisions
Australia	516		355		408		45	%	26	%
New Zealand	177		194		105		-9	%	69	%
Overseas markets	33		93		127		-65	%	-74	%
Total impaired loans	726		642		640		13	%	13	%
After individual provisions
Australia	304		202		220		50	%	38	%
New Zealand	102		111		42		-8	%	large
Overseas markets	15		73		64		-79	%	-77	%
Total net impaired loans	421		386		326		9	%	29	%

	Half	Half	Half	Movt		Movt
	year	year	year	Mar 06		Mar 06
	Mar 06	Sep 05	Mar 05	v. Sep 05		v. Mar 05
	$M	$M	$M	%		%
New and increased impaired loans
Australia	513	303	282	69	%	82	%
New Zealand	102	204	78	-50	%	31	%
Overseas markets	15	69	27	-78	%	-44	%
Total new impaired loans	630	576	387	9	%	63	%

NOTES TO FINANCIAL STATEMENTS (continued)

9. Impaired financial assets, cont’d

Further analysis on impaired loans at 31 March 2006 and interest and/or other income recognised during the period is as follows:

			Interest
	Gross		and / or
	balance	Individual	other income
	outstanding	Provision	recognised
	$M	$M	$M
Impaired loans
Without provisions
Australia	31	—	1
New Zealand	7	—	—
Overseas markets	4	—	—
	42	—	1
With provisions and no, or partial, performance1
Australia	369	178	7
New Zealand	60	40	—
Overseas markets	28	17	—
	457	235	7
With provisions and full performance1
Australia	116	34	2
New Zealand	110	35	3
Overseas markets	1	1	—
	227	70	5
Total impaired loans	726	305	13
Unproductive facilities	76	11	—
Total	802	316	13

1. A loan’s performance is assessed against its contractual repayment schedule

	As at	As at	As at	Movt		Movt
	Mar 06	Sep 05	Mar 05	Mar 06		Mar 06
				v. Sep 05		v. Mar 05
	$M	$M	$M	%		%
Unproductive facilities
Australia	63	29	66	large		-5	%
New Zealand	6	7	—	-14	%	n/a
Overseas markets	7	7	11	0	%	-36	%
Gross unproductive facilities	76	43	77	77	%	-1	%
Individual provision
Australia	9	7	3	29	%	large
New Zealand	—	7	—	-100	%	n/a
Overseas markets	2	3	4	-33	%	-50	%
Individual provision	11	17	7	-35	%	57	%
Net unproductive facilities	65	26	70	large		-7	%

The following amounts are not classified as individually impaired financial assets and therefore are not included within the summary on page 75.

	As at	As at	As at	Movt		Movt
	Mar 06	Sep 05	Mar 05	Mar 06		Mar 06
	$M	$M	$M	v. Sep		v. Mar
				05		05
				%		%
Accruing loans past due 90 days or more
Australia	339	282	262	20	%	29	%
New Zealand	74	66	90	12	%	-18	%
Overseas markets	15	33	32	-55	%	-53	%
	428	381	384	12	%	11	%

NOTES TO FINANCIAL STATEMENTS (continued)

9. Impaired financial assets, cont’d

Interest and other income not recognised on impaired financial assets

The following table shows the estimated amount of interest and other income not recognised, net of interest recoveries and unwind of discount, on average impaired financial assets during the period.

							Movt		Movt
	Half		Half		Half		Mar 06		Mar 06
	year		year		year		v. Sep		v. Mar
	Mar 06		Sep 05		Mar 05		05		05
	$M		$M		$M		%		%

Gross interest and other income receivable on impaired loans, restructured loans and unproductive facilities
Australia	14		14		12		0	%	17	%
New Zealand	9		5		4		80	%	large
Overseas markets	4		8		8		-50	%	-50	%
Total gross interest and other income receivable on impaired financial assets	27		27		24		0	%	13	%
Interest recognised1
Australia	(10	)	(7	)	(3	)	43	%	large
New Zealand	(3	)	(3	)	(2	)	0	%	50	%
Overseas markets	—		(7	)	(3)		-100	%	-100	%
Total interest recognised	(13	)	(17	)	(8	)	-24	%	63	%
Net interest and other income not recognised
Australia	4		7		9		-43	%	-56	%
New Zealand	6		2		2		large		large
Overseas markets	4		1		5		large		-20	%
Total net interest and other income not recognised	14		10		16		40	%	-13	%

1. Under AIFRS, from 1 October 2005 the impairment loss on an impaired loan is calculated as the difference between the asset’s carrying amount and the estimated future cash flows discounted to their present value. As this discount unwinds during the period it is recognised as interest. The comparatives do not reflect this change and represent interest and other income received (refer Note 1 (vi))

In the event of customer default, any loan security is held as mortgagee in possession and therefore the Group does not hold any other real estate owned assets.

NOTES TO FINANCIAL STATEMENTS (continued)

10. Provision for credit impairment

			Previous AGAAP1
	Half		Half		Half		Movt		Movt
	year		year		year		Mar 06		Mar 06
	Mar 06		Sep 05		Mar 05		v. Sep 05		v. Mar 05
	$M		$M		$M		%		%
Collective provision
Balance at start of period	2,167		2,080		1,992		4	%	9	%
Adjustment due to adoption of accounting standard AASB 1392	(288	)	—		—		n/a		n/a
Provisions acquired (disposed)	—		—		(13	)	n/a		-100	%
Adjustment for exchange rate fluctuations	(12	)	(3	)	(32	)	large		-63	%
Charge to income statement	36		296		284		-88	%	-87	%
Transfer to individual provision3	—		(266	)	(205	)	-100	%	-100	%
Recoveries3	—		60		54		-100	%	-100	%
Total collective provision	1,903		2,167		2,080		-12	%	-9	%
Individual provision
Balance at start of period	273		321		384		-15	%	-29	%
Adjustment due to adoption of accounting standard AASB 1392	(1	)	—		—		n/a		n/a
Charge to income statement	188		—		—		n/a		n/a
Adjustment for exchange rate fluctuations	(3	)	(4	)	(7	)	-25	%	-57	%
Discount unwind	(13	)	—		—		n/a		n/a
Bad debts written off	(182	)	(310	)	(261	)	-41	%	-30	%
Recoveries of amounts previously written off	54		—		—		n/a		n/a
Transfer from collective provision3	—		266		205		-100	%	-100	%
Total individual provision	316		273		321		16	%	-2	%
Total provision for credit impairment	2,219		2,440		2,401		-9	%	-8	%

			Previous AGAAP
							Movt		Movt
	Half		Half		Half		Mar 06		Mar 06
	year		year		year		v. Sep		v. Mar
	Mar 06		Sep 05		Mar 05		05		05
	$M		$M		$M		%		%
Provision movement analysis
New and increased provisions
Australia	255		216		162		18	%	57	%
New Zealand	40		99		47		-60	%	-15	%
Overseas markets	12		37		43		-68	%	-72	%
	307		352		252		-13	%	22	%
Provision releases	(65	)	(86	)	(47	)	-24	%	38	%
	242		266		205		-9	%	18	%
Recoveries of amounts previously written off	(54	)	(60	)	(54	)	-10	%	0	%
Individual provision charge	188		206		151		-9	%	25	%
Net credit to collective provision	36		90		133		-60	%	-73	%
Charge to Income Statement	224		296		284		-24	%	-21	%

	As at	As at	As at	Movt		Movt
	Mar 06	Sep 05	Mar 05	Mar 06		Mar 06
	$M	$M	$M	v. Sep		v. Mar
				05		05
				%		%
Individual provision balance
Australia	221	160	191	38	%	16	%
New Zealand	75	90	63	-17	%	19	%
Domestic markets	296	250	254	18	%	17	%
Overseas markets	20	23	67	-13	%	-70	%
Total individual provision	316	273	321	16	%	-2	%

1. 2005 figures represent general provision and specific provision

2. Refer Note 24

3. Under AIFRS, the impairment calculation results in a nil amount for this line from 1 October 2005

NOTES TO FINANCIAL STATEMENTS (continued)

11. Loan capital

				Movt		Movt
	Half	Half	Half	Mar 06		Mar 06
	year	year	year	v. Sep		v. Mar
	Mar 06	Sep 05	Mar 05	05		05
	$M	$M	$M	%		%
Hybrid loan capital
US stapled trust security issue1	1,536	1,443	1,425	6	%	8	%
ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS)	1,000	—	—	n/a		n/a
Perpetual subordinated notes	419	394	389	6	%	8	%
Subordinated notes	8,166	7,300	6,307	12	%	29	%
Total Loan Capital	11,121	9,137	8,121	22	%	37	%

1. Loan capital of USD1.1 billion is subordinated in right of payment to the claims of depositors and all other creditors of the parent entity and its controlled entities which have issued the notes. Hybrid loan capital constitutes Tier 1 capital as defined by the Australian Prudential Regulation Authority for capital adequacy purposes

2. ANZ StEPS securities are classified as Loan Capital instead of share capital under AIFRS financial reporting

12. Share Capital

Issued and quoted securities

	Number	Issue price		Amount paid
	quoted	per share		up per share
Ordinary shares
As at 31 March 2006	1,828,674,133
Issued during the half year	8,316,739
Bought back during half year	6,092,086

Preference shares
As at 31 March 2006
Euro Hybrid1	500,000	€	1,000	€	1,000

1. On 13 December 2004 the Group issued €500 million hybrid capital into the European market. The instruments consist of a coupon paying note issued by ANZ Jackson Funding PLC stapled to a fully paid up €1,000 preference share issued by Australia and New Zealand Banking Group Limited

	Half		Half		Half
	year		year		year
	Mar 06		Sep 05		Mar 05
Net profit as a % of shareholders’ equity including preference shares at end of period	19.3	%	16.6	%	16.4	%

NOTES TO FINANCIAL STATEMENTS (continued)

13. Shareholders’ Equity

	Half		Half		Half		Movt		Movt
	year		year		year		Mar 06		Mar 06
	Mar 06		Sep 05		Mar 05		v . Sep 05		v . Mar 05
	$M		$M		$M		%		%
Share capital
Balance at start of period	9,911		9,840		8,992		1	%	10	%
Adjustment due to adoption of AIFRS	(987	)	-		(62	)	n/a		large
Ordinary share capital
Rights issue	-		-		-		n/a		n/a
Dividend reinvestment plan	85		75		78		13	%	9	%
Group employee share acquisition scheme	37		27		30		37	%	23	%
Group share option scheme	39		56		48		-30	%	-19	%
Group Share Buyback	(146	)	(87	)	(117	)	68	%	25	%
Preference share capital
New preference share issues	-		-		871		n/a		-100	%
Total share capital	8,939		9,911		9,840		-10	%	-9	%
Asset revaluation reserve
Balance at start of period	-		-		31		n/a		-100	%
Adjustment due to adoption of AIFRS1	-		-		(31	)	n/a		-100	%
Total asset revaluation reserve	-		-		-		n/a		n/a
Foreign currency translation reserve
Balance at start of period	(443	)	(284	)	218		56	%	large
Adjustment due to adoption of AIFRS2	-		-		(218	)	n /a		-100	%
Restated balance at beginning of period	(443	)	(284	)	-		56	%	n/a
Currency translation adjustments net of hedges after tax	(305	)	(159	)	(284	)	92	%	7	%
Transfer from general reserve	-		-		-		n/a		n/a
Total foreign currency translation reserve	(748	)	(443	)	(284	)	69	%	large

Share option reserve3
Balance at start of period	67		56		-		20	%	n/a
Adjustment on adoption of AIFRS	-		-		44		n/a		-100	%
Restated balance at beginning of period	67		56		44		20	%	52	%
Share-based payments	11		11		12		0	%	-8	%
Transfer to share capital	-		-		-		n/a		n/a
Total share option reserve	78		67		56		16	%	39	%

Available-for-sale revaluation reserve4
Balance at start of period	-		-		-		n/a		n/a
Adjustments on adoption of accounting policies specified							n/a		n/a
by AASB 132 & AASB 1395	(10	)	-		-		n/a		n/a
Restated balance at beginning of period	(10	)	-		-		n/a		n/a
Valuation gain (loss) recognised after tax	18		-		-		n/a		n/a
Cumulative (gain) loss transferred to the income
statement on sale of financial assets	-		-		-		n/a		n/a
Cumulative (gain) loss transferred to the income
statement on impairment of financial assets	-		-		-		n /a		n/a
Total available-for-sale revaluation reserve	8		-		-		n /a		n/a

1. Includes a $20 million increase in the opening asset revaluation reserve balance relating to reclassification of legacy balances. The asset revaluation reserve has been transferred to retained earnings on adoption of AIFRS, refer Note 24 (vi)

2. Includes a $19 million increase in the opening foreign currency translation reserve balance relating to reclassification of legacy balances. The foreign currency translation reserve has been transferred to retained earnings on adoption of AIFRS, refer Note 24 (v)

3. The share option reserve arises on the grant of share options to selected employees under the ANZ share option plan. Amounts are transferred out of the reserve and into share capital when the options are exercised. Further information about share based payments to employees is disclosed in Note 24 (iii) to the financial statements

4. The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold, that portion of the reserve which relates to that financial asset, is realised and recognised in the profit or loss (refer Note 1 (ix)). Where a revalued financial asset is impaired, that portion of the reserve which relates to that financial asset is recognised in the profit or loss (refer Note 1 (ix))

5. ANZ has taken the election, pursuant to accounting standard AASB 1 (36A), to not comply with accounting standards AASB 132 and AASB 139 in the comparative information in its first AIFRS financial report. Therefore the 2005 year is nil for this line item

NOTES TO FINANCIAL STATEMENTS (continued)

13. Shareholders’ Equity, cont’d

	Half		Half		Half		Movt		Movt
	year		year		year		Mar 06		Mar 06
	Mar 06		Sep 05		Mar 05		v .Sep 05		v .Mar 05
	$M		$M		$M		%		%
Hedging reserve6
Balance at start of period	n/a		n/a		n/a		n/a		n/a
Adjustments on adoption of accounting policies							n/a		n/a
specified by AASB 132 & AASB 1395	162		n/a		n/a		n/a		n/a
Restated balance at beginning of period	162		n/a		n/a		n/a		n/a
Gain (loss) recognised after tax	28						n/a		n/a
Transferred to income statement	(14	)	n/a		n/a		n/a		n/a
Total hedging reserve	176		n/a		n/a		n/a		n/a
General reserve
Balance at start of period	181		181		181		0	%	0	%
Transfer (to) from retained profits/FCTR	-		-		-		n/a		n/a
Total general reserve	181		181		181		0	%	0	%
Capital reserve	149		149		149		0	%	0	%
Total reserves	(156	)	(46	)	102		large		large
Retained profits
Balance at start of period	9,646		8,967		8,336		8	%	16	%
Adjustment on adoption of AIFRS7	(431	)	-		71		n/a		large
Restated balance at beginning of period	9,215		8,967		8,407		3	%	10	%
Net profit attributable to shareholders of the Company	1,811		1,620		1,555		12	%	16	%
Total available for appropriation	11,026		10,587		9,962		4	%	11	%
Transfers from (to) reserves	-		-		-		n/a		n/a
Actuarial gain (loss) on defined benefit plans after tax8	25		18		7		39	%	large
Ordinary share dividends paid	(1,060	)	(913	)	(964	)	16	%	10	%
Preference share dividends paid	(12	)	(46	)	(38	)	-74	%	-68	%
Retained profits at end of period	9,979		9,646		8,967		3	%	11	%
Share capital and reserves attributable to to shareholders’ of the Company	18,762		19,511		18,909		-4	%	-1	%
Minority interest	34		27		18		26	%	89	%
Total shareholders’ equity	18,796		19,538		18,927		-4	%	-1	%

6. The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on the hedge is recognised in the profit or loss when the hedged transaction impacts profit or loss, consistent with the applicable accounting policy as detailed in Note 1 (vii)

7. Comprises

- Remeasurement of the carrying value of the Group’s investment in INGA as at 1 October 2005

- Adjustment in respect of hedging derivative financial instruments as at 1 October 2005

- Recognition of the fair value of derivatives relating to securitisation and structured finance transactions as at 1 October 2005

- Deferral of previously recognised fees now treated as an adjustment to yield on 1 October 2005

- Recalculation of the loan impairment provision on 1 October 2005 resulting from the change to use of the incurred loss approach from the Economic Loss Provisioning approach

8. ANZ has taken the option available under AASB 119 to recognise actuarial gains/losses on defined benefit superannuation plans directly in retained profits (refer Note 1 (xiii) and Note 24 (ii))

NOTES TO FINANCIAL STATEMENTS (continued)

14. Capital Management

	As at		As at		As at		Movt		Movt
	Mar 06		Sep 051		Mar 051		Mar 06		Mar 06
							v. Sep		v. Mar
	$M		$M		$M		05		05
							%		%
Qualifying capital
Tier 1
Total shareholders’ equity and outside equity interests	18,796		19,538		18,927		-4	%	-1	%
Adjustments following adoption of AIFRS2			(50	)	81		-100	%	-100	%
APRA transitional reporting adjustments
Deferred fee revenue and expenses	258		-		-		n/a		n/a
Pension fund deficiency charge	91		-		-		n/a		n/a
Cash flow hedging reserve	(176	)	-		-		n/a		n/a
Other adjustments	(5	)	-		-		n/a		n/a
Adjusted Total Shareholders’ equity and outside equity interests	18,964		19,488		19,008		-3	%	0	%
Loan capital (StEPS)3	1,000
Hybrid loan capital4	1,536		1,443		1,425		6	%	8	%
Less: Asset revaluation reserve	-		(31	)	(31	)	-100	%	-100	%
Dividend5	(1,024	)	(1,077	)	(930	)	-5	%	10	%
Accumulated retained profits and reserves of insurance, funds management and securitisation entities	(161	)	(213	)	(266	)	-24	%	-39	%
Intangibles	(3,943	)	(3,902	)	(4,007	)	1	%	-2	%
Capitalised expenses6	(534	)	(524	)	(492	)	2	%	9	%
Investment in ANZ Lenders Mortgage Insurance	(27	)	(27	)	(27	)	0	%	0	%
Tier 1 capital	15,811		15,157		14,680		4	%	8	%
Tier 2
Asset revaluation reserve	-		31		31		-100	%	-100	%
Perpetual subordinated notes	419		394		389		6	%	8	%
General reserve for impairment of financial assets7	1,318		1,448		1,390		-9	%	-5	%
	1,737		1,873		1,810		-7	%	-4	%
Subordinated notes8	7,416		6,701		5,769		11	%	29	%
Tier 2 capital	9,153		8,574		7,579		7	%	21	%
Deductions
Investment in funds management and securitisation entities	86		84		106		2	%	-19	%
Investment in joint ventures with ING9	525		528		478		-1	%	10	%
Other	334		172		183		94	%	83	%
Total deductions	945		784		767		21	%	23	%
Total qualifying capital	24,019		22,947		21,492		5	%	12	%
Adjusted common equity (ACE)
Tier 1 capital	15,811		15,157		14,680		4	%	8	%
Less: Preference share capital	3,385		3,233		3,263		5	%	4	%
Deductions	945		784		767		21	%	23	%
Adjusted common equity10 (ACE)	11,481		11,140		10,650		3	%	8	%
Ratios (%)
Tier 1	6.8	%	6.9	%	7.0	%
Tier 2	4.0	%	3.9	%	3.6	%
	10.8	%	10.8	%	10.6	%
Less: Deductions	(0.4	%)	(0.3	%)	(0.3	%)
Total	10.4	%	10.5	%	10.3	%
Adjusted common equity	5.0	%	5.1	%	5.1	%
Risk weighted assets	230,653		219,573		209,524

1. 2005 figures are calculated based on the Australian Prudential Regulatory Authority requirements. These have not been retrospectively adjusted

2. Refer Note 24

3. Treated as preference share capital under AGAAP. Associated costs are deducted from capital

4. Represents the US Stapled Trust Security Issue approved by APRA as qualifying for Tier 1 status. Refer Note 11

5. Relates to dividend not provided for

6. Comprises loan and lease origination fees, capitalised securitisation establishment costs and costs associated with debt raisings

7. Net of attributable future income tax benefit

8. For capital adequacy calculation purposes, subordinated note issues are reduced by 20% of the original amount over the last four years to maturity

9. Joint ventures with ING in Australia and New Zealand

10. Tier 1 capital, less preference share capital (converted at 31 March 2006 rates), less deductions

NOTES TO FINANCIAL STATEMENTS (continued)

14. Capital management, cont’d

	Assets		Risk Weighted
				Assets
	Mar	Sep	Mar	Sep
	2006	2005	2006	2005
	$M	$M	$M	$M
Balance Sheet

Zero risk weighted assets1	31,779	23,160	-	-
Claims on approved banks and local governments	19,759	16,054	3,952	3,211
Advances secured by mortgages eligible for 50% risk weighting	123,998	118,895	61,999	59,448
Other assets - credit risk	133,529	127,204	133,529	127,204
Total statement of financial position assets - credit risk	309,065	285,313	199,480	189,863
Trading assets - market risk	10,298	7,872	n/a	n/a
Impact of adoption of AIFRS2	-	4,919	-	-
Total balance sheet	319,363	298,104	199,480	189,863

	Notional Amount		Credit Equivalent		Risk Weighted
						Assets
	Mar	Sep	Mar	Sep	Mar	Sep
	2006	2005	2006	2005	2006	2005
	$M	$M	$M	$M	$M	$M
Off-balance sheet exposures3
Direct credit substitutes	9,193	9,657	9,193	9,657	6,732	7,337
Trade and performance related items	14,534	13,175	6,170	5,683	5,451	4,953
Commitments	89,236	87,319	13,352	14,017	11,983	12,249
Foreign exchange, interest rate and other market related transactions	1,029,803	782,380	19,116	12,309	5,354	3,681
Total off balance sheet exposures - credit risk	1,142,766	892,531	47,831	41,666	29,520	28,220
Total risk weighted assets - credit risk					229,000	218,083
Risk weighted assets - market risk					1,653	1,490
Total risk weighted assets					230,653	219,573

1. Includes $5,086 million in assets excluded for risk weighting calculations for Australian Prudential Regulation Authority reporting purposes

2. Refer Note 24

3. Excludes off balance sheet exposures in subsidiaries consolidated on adoption of AIFRS from 1 October 2004 as required by Australian Prudential Regulation Authority

NOTES TO FINANCIAL STATEMENTS (continued)

15. Average balance sheet and related interest - statutory basis

Averages used in the following tables are predominantly daily averages. Interest income figures are presented on a tax-equivalent basis. Impaired loans are included under the interest earning asset category, “loans, advances and bills discounted”. Intragroup interest earning assets and interest bearing liabilities are treated as external assets and liabilities for the geographic segments.

	Half year Mar 06						Half year Sep 05						Half year Mar 05
	Ave bal		Int		Rate		Ave bal		Int		Rate		Ave bal		Int		Rate
	$M		$M		%		$M		$M		%		$M		$M		%
Interest earning assets
Due from other financial institutions
Australia	1,320		32		4.9	%	880		24		5.4	%	733		19		5.2	%
New Zealand	2,131		69		6.5	%	2,092		63		6.0	%	2,392		63		5.3	%
Overseas markets	4,586		99		4.3	%	3,108		58		3.7	%	2,218		32		2.9	%
Trading and available for sale and other assets
Australia	15,255		433		5.7	%	11,300		309		5.5	%	10,296		280		5.5	%
New Zealand	2,292		83		7.3	%	2,052		63		6.1	%	2,401		70		5.8	%
Overseas markets	2,687		57		4.3	%	2,805		49		3.5	%	3,179		51		3.2	%
Loans and advances
Australia	165,103		5,987		7.3	%	157,694		5,590		7.1	%	148,104		5,081		6.9	%
New Zealand	65,866		2,849		8.7	%	62,829		2,648		8.4	%	59,230		2,423		8.2	%
Overseas markets	9,172		308		6.7	%	8,770		244		5.5	%	9,352		217		4.7	%
Acceptances1
Australia	13,725		464		6.8	%
Overseas markets	170		4		4.7	%
Other assets
Australia	3,337		128		7.7	%	2,533		61		4.8	%	1,897		47		5.0	%
New Zealand	4,417		133		6.0	%	3,340		91		5.4	%	2,481		71		5.7	%
Overseas markets	4,303		131		6.1	%	4,011		109		5.4	%	2,623		81		6.2	%
Intragroup assets
Overseas markets	12,046		272		4.5	%	9,242		179		3.9	%	9,706		151		3.1	%
	306,410		11,049				270,656		9,488				254,612		8,586
Intragroup elimination	(12,046	)	(272	)			(9,242	)	(179	)			(9,706	)	(151	)
	294,364		10,777		7.3	%	261,414		9,309		7.1	%	244,906		8,435		6.9	%

Non-interest earning assets
Derivatives
Australia	6,708						6,134						4,024
New Zealand	2,180						1,584						1,707
Overseas markets	(564	)					(364	)					(445	)
Premises and equipment	1,078						1,155						1,033
Acceptances
Australia							13,258						13,073
Overseas markets							86						61
Other assets	13,794						13,516						12,683
Provisions for credit impairment
Australia	(1,499	)					(1,852	)					(1,792	)
New Zealand	(432	)					(621	)					(594	)
Overseas markets	(185	)					2						(32	)
	21,080						32,898						29,718
Total average assets	315,444						294,312						274,624

1. Acceptances have been classified as interest earning assets following adoption of AIFRS on 1 October 2005. This is consistent with the reclassification of commercial bill margins from fees to net interest. Refer Note 24

NOTES TO FINANCIAL STATEMENTS (continued)

15. Average balance sheet and related interest - statutory basis, cont’d

	Half year Mar 06						Half year Sep 05						Half year Mar 05
	Ave bal		Int		Rate		Ave bal		Int		Rate		Ave bal		Int		Rate
	$M		$M		%		$M		$M		%		$M		$M		%
Interest bearing liabilities
Time deposits
Australia	41,323		1,151		5.6	%	40,122		1,106		5.5	%	38,650		1,020		5.3	%
New Zealand	26,868		927		6.9	%	25,537		847		6.6	%	25,626		813		6.4	%
Overseas markets	12,802		283		4.4	%	11,185		210		3.7	%	10,965		173		3.2	%
Savings deposits
Australia	14,765		228		3.1	%	14,092		215		3.0	%	13,699		199		2.9	%
New Zealand	7,021		151		4.3	%	7,264		151		4.1	%	7,155		140		3.9	%
Overseas markets	502		3		1.2	%	419		1		0.5	%	415		1		0.5	%
Other demand deposits
Australia	37,384		812		4.4	%	35,443		765		4.3	%	32,448		666		4.1	%
New Zealand	8,375		242		5.8	%	8,165		219		5.3	%	7,818		193		5.0	%
Overseas markets	968		9		1.9	%	805		7		1.7	%	783		6		1.5	%
Due to other financial institutions
Australia	3,012		78		5.2	%	1,515		47		6.2	%	1,397		39		5.6	%
New Zealand	2,128		58		5.5	%	1,567		47		6.0	%	1,793		45		5.0	%
Overseas markets	6,602		164		5.0	%	5,073		101		4.0	%	4,209		64		3.0	%
Commercial paper
Australia	9,605		275		5.7	%	7,770		226		5.8	%	7,988		218		5.5	%
New Zealand	6,879		253		7.4	%	7,769		268		6.9	%	7,664		253		6.6	%
Overseas markets	8,626		180		4.2	%	6,421		103		3.2	%	6,099		69		2.3	%
Borrowing corporations' debt
Australia	9,124		257		5.6	%	9,276		264		5.7	%	9,396		254		5.4	%
New Zealand	1,962		67		6.8	%	1,927		64		6.6	%	1,981		62		6.3	%
Acceptances1
Australia	13,725		384		5.6	%
Overseas markets	170		4		4.7	%
Loan capital, bonds and notes
Australia	43,593		1,252		5.8	%	41,281		1,176		5.7	%	35,312		962		5.5	%
New Zealand	8,891		331		7.5	%	5,906		211		7.1	%	3,601		124		6.9	%
Overseas markets	137		3		4.4	%	136		2		2.9	%	139		2		2.9	%
Other liabilities2
Australia	4,847		233		n/a		4,729		243		n/a		4,460		206		n/a
New Zealand	234		50		n/a		150		66		n/a		64		35		n/a
Overseas markets	469		14		n/a		95		7		n/a		86		11		n/a
Intragroup liabilities
Australia	5,724		82		2.9	%	3,100		(6	)	-0.4	%	4,190		(8	)	-0.4	%
New Zealand	6,322		190		6.0	%	6,142		185		6.0	%	5,516		159		5.8	%
	282,058		7,681				245,889		6,525				231,454		5,706
Intragroup elimination	(12,046	)	(272	)			(9,242	)	(179	)			(9,706	)	(151	)
	270,012		7,409		5.5	%	236,647		6,346		5.3	%	221,748		5,555		5.0	%

Non-interest bearing liabilities
Deposits
Australia	4,387						4,173						4,121
New Zealand	3,858						3,771						3,298
Overseas markets	1,104						1,071						881
Acceptances
Australia							13,258						13,073
Overseas markets							86						61

1. Acceptances have been classified as interest bearing liabilities following adoption of AIFRS on 1 October 2005. This is consistent with the reclassification of commercial bill margins from fees to net interest. Refer Note 24

2. Includes foreign exchange swap costs

NOTES TO FINANCIAL STATEMENTS (continued)

15. Average balance sheet and related interest - statutory basis, cont’d

	Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M
Total average assets
Australia	211,498		197,692		183,465
New Zealand	81,736		76,470		72,463
Overseas markets	34,256		29,392		28,402
less intragroup elimination	(12,046	)	(9,242	)	(9,706	)
	315,444		294,312		274,624
% of total average assets attributable
to overseas activities	33.0	%	32.8	%	33.2	%
Average interest earning assets
Australia	198,740		172,407		161,030
New Zealand	74,706		70,313		66,504
Overseas markets	32,964		27,936		27,078
less intragroup elimination	(12,046	)	(9,242	)	(9,706	)
	294,364		261,414		244,906
Total average liabilities
Australia	201,742		187,111		173,496
New Zealand	75,838		71,910		68,164
Overseas markets	31,776		25,457		24,484
less intragroup elimination	(12,046	)	(9,242	)	(9,706	)
	297,310		275,236		256,438
Tota l av erage shareholders’ equity
Ordinary share capital	17,263		17,218		16,677
Preference share capital	871		1,858		1,509
	18,134		19,076		18,186
Total average liabilities and shareholders’ equity	315,444		294,312		274,624
% of total average liabilities attributable to overseas activities	34.1	%	33.1	%	34.0	%

NOTES TO FINANCIAL STATEMENTS (continued)

16. Interest spreads and net interest average margins — statutory basis

Intragroup interest earning assets and interest bearing liabilities are treated as external assets and liabilities for the geographic segments.

	Half year Mar 06 %		Half year Sep 05 %		Half year Mar 05 %
Gross earnings rate1
Australia	7.11		6.92		6.76
New Zealand	8.41		8.13		7.92
Overseas markets	5.30		4.56		3.93
Total Group	7.34		7.10		6.91
Interest spread and net interest average margin may be analysed as follows:
Australia
Gross interest spread	1.91		1.81		1.94
Interest not recognised on impaired assets	(0.00	)	(0.01	)	(0.01	)
Net interest spread	1.91		1.80		1.93
Interest attributable to net non-interest bearing items	0.40		0.45		0.40
Net interest average margin - Australia	2.31		2.25		2.33
New Zealand
Gross interest spread	1.80		1.76		1.96
Interest not recognised on impaired assets	(0.02	)	(0.00	)	(0.01	)
Net interest spread	1.78		1.76		1.95
Interest attributable to net non-interest bearing items	0.54		0.53		0.48
Net interest average margin - New Zealand	2.32		2.29		2.43
Overseas markets
Gross interest spread	0.95		1.00		1.09
Interest not recognised on impaired assets	(0.02	)	(0.01	)	(0.04	)
Net interest spread	0.93		0.99		1.05
Interest attributable to net non-interest bearing items	0.36		0.49		0.47
Net interest average margin - Overseas markets	1.29		1.48		1.52
Group
Gross interest spread	1.85		1.76		1.90
Interest not recognised on impaired assets	(0.01	)	(0.01	)	(0.01	)
Net interest spread	1.84		1.75		1.89
Interest attributable to net non-interest bearing items	0.45		0.51		0.47
Net interest average margin	2.29		2.26		2.36

1. Average interest rate received on interest earning assets

NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Segment analysis

The following analysis shows segment revenue, total assets and result for each business segment.

Industry

	Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M		Movt Mar 06 v. Sep 05 %		Movt Mar 06 v. Mar 05 %
Income1,2
Personal Banking Australia	4,371		4,153		3,794		5	%	15	%
Institutional	2,908		2,317		2,520		26	%	15	%
New Zealand Businesses	2,883		2,693		2,384		7	%	21	%
Corporate Australia	1,073		855		804		25	%	33	%
Esanda and UDC	637		645		616		-1	%	3	%
Asia Pacific	266		246		227		8	%	17	%
Non-continuing businesses	59		166		135		-64	%	-56	%
Group Centre3	2,634		2,065		1,317		28	%	100	%
Intragroup eliminations	(2,459	)	(1,980	)	(1,660	)	24	%	48	%
Income	12,372		11,160		10,137		11	%	22	%
Net profit after income tax2
Personal Banking Australia	542		485		468		12	%	16	%
Institutional	486		461		450		5	%	8	%
New Zealand Businesses	335		265		295		26	%	14	%
Corporate Australia	212		194		182		9	%	16	%
Esanda and UDC	53		55		66		-4	%	-20	%
Asia Pacific	46		44		39		5	%	18	%
Non-continuing businesses	30		63		63		-52	%	-52	%
Group Centre3	107		53		(8	)	Large		Large
Net profit	1,811		1,620		1,555		12	%	16	%
Total assets
Personal Banking Australia	114,408		107,521		101,660		6	%	13	%
Institutional	82,002		69,843		63,840		17	%	28	%
New Zealand Businesses	60,672		59,962		55,907		1	%	9	%
Corporate Australia	24,071		22,902		21,768		5	%	11	%
Esanda and UDC	15,583		15,342		14,729		2	%	6	%
Asia Pacific	3,281		2,888		2,521		14	%	30	%
Non-continuing businesses	1,260		2,122		4,871		-41	%	-74	%
Group Centre3	18,086		17,524		17,488		3	%	3	%
Total assets	319,363		298,104		282,784		7	%	13	%

1.		Refer definitions on pages 124 to 125
2.		Equity standardised. Refer definitions on pages 124 to 125
3.		Group Centre includes Treasury, Operations, Technology and Shared Services and allocations required to report business units on a comparable basis

NOTES TO FINANCIAL STATEMENTS (continued)

18. Contingent liabilities and contingent assets

Contingent liabilities

§ General

There are outstanding court proceedings, claims and possible claims against the Group, the aggregate amount of which cannot readily be quantified. Appropriate legal advice has been obtained and, in the light of such advice, provisions as deemed necessary have been made. In some instances we have not disclosed the estimated financial impact as this may prejudice the interests of the Group.

§ Sale of Grindlays businesses

On 31 July 2000, ANZ completed the sale to Standard Chartered Bank (SCB) of ANZ Grindlays Bank Limited and the private banking business of ANZ in the United Kingdom and Jersey, together with ANZ Grindlays (Jersey) Holdings Limited and its subsidiaries, for USD1.3 billion in cash. ANZ provided warranties and certain indemnities relating to those businesses and, where it is anticipated that payments would be likely under the warranties or indemnities, made provisions to cover the anticipated liability. The issues below have not impacted our reported results. All settlements and costs have been covered within the provisions established at the time. ANZ may be held liable in relation to the following:

- FERA

In 1991 certain amounts were transferred from non-convertible Indian Rupee accounts maintained with Grindlays in India. These transactions may not have complied with the provisions of the Foreign Exchange Regulation Act, 1973. Grindlays, on its own initiative, brought these transactions to the attention of the Reserve Bank of India. The Indian authorities have served notices on Grindlays and certain of its officers in India that could lead to possible penalties. Criminal prosecutions have also been foreshadowed and, in the case of two former officers and the bank, commenced. Grindlays is contesting the validity of these prosecutions.

- Differential Cheques

In June 2003, Grindlays was successful in its appeal against orders to repay, with interest, two payments it received from a stockbroker in 1991 in connection with securities transactions. These orders had directed repayment of Indian Rupees 24 million (plus interest accruing at 24% since 1991). Since the appeal decision was handed down, no further action has been taken against Grindlays in relation to notices in respect of a further eleven payments received by it in 1991 in similar circumstances totalling Indian Rupees 225 million.

In addition, ANZ provided an indemnity relating to tax liabilities of Grindlays (and its subsidiaries) and the Jersey Sub-Group to the extent to which such liabilities were not provided for in the Grindlays accounts as at 31 July 2000. Claims have been made under this indemnity with no material impact on the Group expected.

§ Contingent tax liability

The Group in Australia was during 2005 subjected to client risk reviews by the Australian Taxation Office (ATO) across a broad spectrum of matters, as part of normal ATO procedures. The reviews mainly covered years up to 2003. Matters listed by the ATO for further investigation remain outstanding.

The ATO is also reviewing the taxation treatment of certain other transactions undertaken by the Group in the course of normal business activities.

In addition, at the Company’s request the ATO is reviewing the taxation treatment of the sale of Grindlays in 2000. It is also reviewing the transfer of the life and funds management businesses into the joint venture with ING in 2002.

The Group in New Zealand is being audited by the Inland Revenue Department (IRD) as part of normal revenue authority procedures, with a particular focus on certain kinds of structured finance transactions. The IRD has issued Notices of Proposed Adjustment (the ‘Notices’) in respect of some of those structured finance transactions. The Notices are not tax assessments and do not establish a tax liability, but are the first step in a formal disputes process. In addition, some tax assessments have been received. Should the same position be adopted by the IRD on the remaining transactions of that kind as reflected in the Notices and tax assessments received, the maximum potential tax liability would be approximately NZD451 million (including interest tax effected) for the period to 31 March 2006. Of that maximum potential liability, approximately NZD129 million is subject to tax indemnities provided by Lloyds TSB Bank PLC under the agreement by which ANZ acquired the National Bank of New Zealand and which relate to transactions undertaken by the National Bank of New Zealand before December 2003.

General or issue-specific audits and other investigations are being undertaken by revenue authorities in the United States, the United Kingdom and in other jurisdictions as part of normal revenue authority activity in those countries.

The Company has assessed these and other taxation claims arising in Australia, New Zealand and elsewhere, including seeking independent advice where appropriate, and believes that it holds appropriate provisions.

NOTES TO FINANCIAL STATEMENTS (continued)

18. Contingent liabilities and contingent assets, cont’d

§ Interbank Deposit Agreement

ANZ has entered into an Interbank Deposit Agreement with the major banks in the payments system. This agreement is a payment system support facility certified by the Australian Prudential Regulation Authority, where the terms are such that if any bank is experiencing liquidity problems, the other participants are required to deposit equal amounts of up to $2 billion for a period of 30 days. At the end of 30 days the deposit holder has the option to repay the deposit in cash or by way of assignment of mortgages to the value of the deposit.

§ Clearing and Settlement Obligations

In accordance with the clearing and settlement arrangements set out:

- in the Australian Payments Clearing Association Limited (APCA) Regulations for the Australian Paper Clearing System, the Bulk Electronic Clearing System, the Consumer Electronic Clearing System and the High Value Clearing System (HVCS), the Company has a commitment to rules which could result in a bilateral exposure and loss in the event of a failure to settle by a member institution; and

- in the Austraclear System Regulations and the CLS Bank International Rules, the Company has a commitment to participate in loss-sharing arrangements in the event of a failure to settle by a member institution.

For both the APCA HVCS and Austraclear, the obligation arises only in limited circumstances.

Contingent asset matters

§ National Housing Bank

In 1992, Grindlays received a claim aggregating to approximately Indian Rupees 5.06 billion from the National Housing Bank (NHB) in India. The claim arose out of cheques drawn by NHB in favour of Grindlays, the proceeds of which were credited to the account of a Grindlays customer.

Grindlays won an arbitration award in March 1997, under which NHB paid Grindlays an award of Indian Rupees 9.12 billion. NHB subsequently won an appeal to the Special Court of Mumbai, after which Grindlays filed an appeal with the Supreme Court of India. Grindlays paid the disputed money including interest into court. Ultimately, the parties settled the matter and agreed to share the moneys paid into court which by then totalled Indian Rupees 16.45 billion (AUD 661 million at 19 January 2002 exchange rates), with Grindlays receiving Indian Rupees 6.20 billion (AUD 248 million at 19 January 2002 exchange rates) of the disputed monies. ANZ in turn received a payment of USD124 million (USD equivalent of the Indian Rupees received by Grindlays) from Standard Chartered Bank under the terms of an indemnity given in connection with the sale of Grindlays to Standard Chartered Bank.

ANZ Claims

ANZ has pursued two separate actions arising from the above.

- A $130 million plus interest claim against its insurers. $130 million being the balance of the limit of indemnity under ANZ’s insurance arrangements for the 1991-92 policy year.

ANZ has settled the claim for $114.3 million which has been recognised in these accounts, less an amount of $0.9 million which was recognised in the accounts at 30 September 2005.

- ANZ is entitled to share with NHB in the proceeds of any recovery from the estate of the customer whose account was credited with the cheques drawn by NHB. However, the Indian Taxation Department is claiming a statutory priority to all of the funds available for distribution to creditors of that customer. Proceedings are currently on foot in the Special Court, Mumbai to determine these issues.

NOTES TO FINANCIAL STATEMENTS (continued)

19. Note to the Cash Flow Statement

(a) Reconciliation of profit after income tax to net cash provided by operating activities

	Half		Half		Half
	year		year		year
	Mar 06		Sep 05		Mar 05
	Inflows		Inflows		Inflows
	(Outflows)		(Outflows)		(Outflows)
	$M		$M		$M
Reconciliation of profit after income tax to net cash provided by operating activities
Profit after income tax	1,811		1,620		1,555
Adjustments to reconcile to net cash provided by operating activities
Provision for credit impairment	224		296		284
Depreciation and amortisation	145		244		240
Provision for restructuring and other provisions	78		261		295
Payments from provisions	(102	)	(218	)	(280	)
(Profit) loss on property disposals	3		5		17
(Increase) decrease in trading securities	881		(183	)	(638	)
(Increase) decrease in Liquid assets - greater than 3 months	(1,798	)	(358	)	(370	)
(Increase)decrease in Due from other banks-more than 90 days	806		(358	)	(13	)
(Increase) decrease in loans and advances	(16,502	)	(13,365	)	(15,423	)
(Increase) decrease in regulatory deposits	(47	)	(19	)	24
Decrease (increase) in interest receivable	(22	)	67		21
Increase (decrease) in deposits and other borrowings	8,729		5,802		14,054
Increase (decrease) in due to other financial insititutions	1,159		2,080		2,892
Increase (decrease) in payables and other liabilities	119		(652	)	(687	)
(Decrease) increase in interest payable	110		202		12
(Increase) decrease in net tax assets	121		38		124
Other	(196	)	(162	)	(770	)
Net cash provided by operating activities	(4,481	)	(4,700	)	1,337

(b) Reconciliation of cash and cash equivalents

Cash at the end of the period is as follows
Liquid assets - less than 3 months	9,943	9,600	7,180
Due from other financial institutions - less than 3 months	6,902	4,102	4,516
	16,845	13,702	11,696
Non-cash financing and investment activities
Share capital issues
Dividend reinvestment plan	85	75	78

NOTES TO FINANCIAL STATEMENTS (continued)

20. Changes in composition of the Group

Newly controlled entities

The following securitisation special purpose entities were consolidated as part of the Group from 1 October 2004 because of the application of new AASB UIG Interpretation 112: ‘Consolidation - Special Purpose Entities’. The entities were not included in the previous year’s financial statements because AASB UIG 112 became operative on 1 October 2005.

§ Arc Funding Pty Ltd	§ Kingfisher Trust No. 2	§ Omeros II Trust
§ Aurora Securitisation	§ Kingfisher Trust 2001-1G	§ Orion Funding Pty Ltd
§ Echo Funding Pty Ltd	§ Kingfisher Trust 2004-1G	§ Solera Trust
§ Eos Trust	§ Kingfisher Securitisation Pty Ltd	§ Stellar Funding Pty Ltd
§ Kingfisher Trust No. 1	§ Omeros Trust	§ Coral Finance Ltd

The impact of the consolidation of these entities is explained in Note 24.

Disposal of controlled entities

There were no material controlled entities disposed of during the half year to 31 March 2006. On 30 September 2005, the controlled entities NBNZ Life Insurance Limited and NBNZ Investment Services Limited were sold. The profit before tax on disposal was $14 million ($14 million after tax). The after tax contribution prior to disposal was $9 million in the September 2005 half (Mar 2005 half: $9 million).

21. Associates, joint venture entities and investments

	Half	Half	Half
	year	year	year
	Mar 06	Sep 05	Mar 05
	$M	$M	$M
Aggregate associates and joint venture entities
Operating profit	90	93	108
Profit after income tax	90	93	108

Material contributions to profit

	Contribution to Group pre-tax profit			Ownership interest held by Group
	Half	Half	Half	As at	As at
	year	year	year	Mar 06	Sep 05	As at
	Mar 06	Sep 05	Mar 05	%	%	Mar 05
	$M	$M	$M
Associates
PT Panin Indonesia Bank	12	16	21	29	29	29
E*Trade	3	3	3	34	34	35
Joint ventures
ING Australia Limited	57	69	80	49	49	49
ING (NZ) Holdings Limited1	11	-	-	49	49	n/a

1. A joint venture entity from 30 September 2005.

NOTES TO FINANCIAL STATEMENTS (continued)

22. Exchange rates

Major exchange rates used in translation of results of offshore controlled entities and branches into the Group accounts for each reporting period were as follows:

	Balance Sheet			Profit and Loss Average
	As at	As at	As at	Half	Half	Half
	Mar 06	Sep 05	Mar 05	year	year	year
				Mar 06	Sep 05	Mar 05
Euro	0.5890	0.6325	0.5970	0.6202	0.6164	0.5883
Great British pound	0.4104	0.4325	0.4107	0.4237	0.4199	0.4085
New Zealand dollar	1.1700	1.0998	1.0899	1.0921	1.0862	1.0832
United States dollar	0.7162	0.7623	0.7719	0.7418	0.7643	0.7671

23. Significant events since balance date

On 1 September 2006, the Group announced that it had agreed to sell Esanda FleetPartners to Nikko Principal Investments, the Australian private equity arm of Nikko Cordial Corporation.

The sale price of $379 million represents a premium of $234 million to the estimated net assets of $145 million. The sale is subject to regulatory approval and is expected to be completed by the end of October 2006.

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS)

The Group implemented accounting policies in accordance with Australian Equivalents to International Financial Reporting Standards (AIFRS) on 1 October 2004, except for those relating to financial instruments and insurance contracts, which were implemented on 1 October 2005.

The transition was accounted for in accordance with Accounting Standard AASB 1: ‘First time adoption of Australian equivalents to International Financial Reporting Standards’.

The impacts set out below are separated between those applicable from 1 October 2004 (and impacting the comparative periods) and those applicable from 1 October 2005. All amounts are stated on a before tax basis, unless otherwise noted. The reconciliation tables set out in pages 99 to 108 reconcile previous AGAAP to AIFRS and cross reference to the notes below.

AIFRS adjustments with effect from 1 October 2004

(i)	Goodwill
	Initial reduction in retained earnings. Potential volatility in future earnings.

The adoption of AIFRS reduced the carrying amount of goodwill on transition by $5 million at 1 October 2004 (refer Table 1) and $15 million at 1 October 2005 (refer Table 6) related to the acquisition of assets and liabilities that did not meet the AIFRS definition of a business combination. The Group elected not to restate the classification and accounting treatment of past business combinations that occurred prior to 1 October 2004.

Under AIFRS, the past practice of systematically amortising goodwill over the expected period of benefit ceased and was replaced by impairment testing annually or more frequently if events or circumstances indicate that goodwill might be impaired.

This change in accounting policy resulted in:

§ a decrease in the amortisation expense of $224 million for the year to 30 September 2005 (31 March 2005: $110 million), including notional INGA and associates’ goodwill of $45 million (31 March 2005: $23 million) (refer Tables 2 and 3); and

§ a corresponding increase in the carrying value of goodwill, associates and joint venture entities (refer Tables 4
and 5).

(ii)	Defined benefit superannuation schemes
	Initial reduction in retained earnings. Actuarial movements recognised in retained earnings.

On adoption of AASB 119: ‘Employee Benefits’, surpluses (assets) and/or deficits (liabilities) that arise within defined benefit superannuation schemes are recognised on the Balance Sheet.

Under previous AGAAP, the Group accounted for the defined benefit superannuation schemes on a cash basis and did not recognise an asset or liability for the net position of the defined benefit superannuation schemes.

The Group elected to apply the option available under AASB 119 to recognise actuarial gains and losses in the Balance Sheet (i.e. the ‘direct to retained earnings’ approach). The non-cash expense reflecting the notional cost of the benefits accruing to members of the defined benefit schemes in respect of service provided over the reporting period is charged to the Income Statement. All transitional adjustments were, and ongoing movements reported for each scheme are, actuarially determined in accordance with AASB 119. Contributions to the schemes are made in accordance with the governing rules of the relevant schemes and there is no present liability to fund any deficits.

At 1 October 2004, the Group recognised a liability position of $200 million, an asset of $2 million, and a deferred tax asset of $57 million, resulting in a $141 million decrease in retained earnings (refer Table 1).

For the AIFRS comparative year ended 30 September 2005, the Group recognised a decrease in the liability of $34 million (31 March 2005: $10 million) and an increase in the asset of $6 million (31 March 2005: $2 million) largely representing an actuarial gain and a deferred tax adjustment of $16 million (31 March 2005: $4 million). The actuarial gain of $25 million after tax (31 March 2005: $7 million after tax) was adjusted against retained earnings (refer Tables 4 and 5).

(iii)	Share based payments
	Initial reduction in shareholders’ equity. Higher ongoing expenses.

Under previous AGAAP, the Group recognised an expense equal to the full fair value of all deferred shares issued as part of the short term and long term incentive arrangements. The deferred shares vest over one to three years and may be forfeited under certain conditions. The Group did not recognise an expense for options issued to staff or for shares issued under the $1,000 employee share plan. On adoption of AASB 2: ‘Share-based Payment’, the Group recognised an expense for all share based remuneration, including deferred shares and options, and recognises this expense over the relevant vesting period.

The Group elected to retrospectively apply AASB 2 to share based payments granted prior to 7 November 2002.

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

AIFRS adjustments with effect from 1 October 2004, cont’d

(iii)

Share based payments, cont’d.

On 1 October 2004, this change in accounting policy resulted in:

§ the establishment of a share options reserve of $44 million to reflect the fair value of options granted to employees;

§ a reduction in paid up capital of $64 million representing the fair value of unvested shares;

§ recognition of a deferred tax liability of $24 million; and

§ a net decrease to retained earnings of $4 million after tax

(refer Table 1).

For the AIFRS comparative year ended 30 September 2005, the impact of the change was:

§ an increase in the share options reserve of $23 million (31 March 2005: $12 million);

§ an increase in paid up capital of $41 million (31 March 2005: $16 million);

§ an accrual for $1,000 shares of $16 million (31 March 2005: $11 million);

§ a reduction in deferred tax of $17 million (31 March 2005: $7 million); and

§ a decrease in profit after tax of $63 million (31 March 2005: $32 million)

(refer Tables 4 and 5).

(iv)	Securitisation
	Additional assets/liabilities recognised. Immaterial impact on net profit.

AIFRS has introduced new requirements for the recognition of financial assets, including those transferred to a special purpose entity for securitisation. The accounting treatment of existing securitisations has been reassessed. Consequently, some vehicles, which were previously not consolidated, are being consolidated by the Group. This resulted in an increase in assets and liabilities recorded within the Balance Sheet of $5 billion as at 1 October 2004 for the Group (refer Table 1). For the comparative AIFRS year ended 30 September 2005, the Group recognised a decrease of $388 million in both assets and liabilities (31 March 2005: $268 million in assets and $269 million in liabilities), reflecting the net impact of repayment and securitisation of new assets during the year (refer Tables 4 and 5).

The impact on the Income Statement is that income and expenses increased to recognise the income and expense items recorded within these vehicles, with the overall impact on net profit being immaterial.

(v)	Foreign currency translation reserve
	Initial increase in retained earnings, no change to shareholders’ equity.

The Group has elected to apply the option under AASB 121: ‘The Effects of Changes in Foreign Exchange Rates’, to reset amounts recorded within the foreign currency translation reserve to zero. On 1 October 2004, adopting this election resulted in an increase in retained earnings of $218 million (refer Table 1).

(vi)	Asset revaluation reserve — balance relating to land and buildings
	Initial increase in retained earnings, no change to shareholders’ equity.

The Group has elected to apply the option under AASB 1: ‘First time Adoption of Australian Equivalents to International Financial Reporting Standards’, to recognise the value of Land and Buildings at deemed cost. As a result, the Group’s asset revaluation reserve of $31 million relating to Land and Buildings was reset to zero as at 1 October 2004 and adjusted against retained earnings (refer Table 1).

(vii)	Taxation
	Change in methodology. Immaterial impacts.

Under AASB 112: ‘Income Taxes’, a balance sheet method of tax effect accounting has been adopted, replacing the ‘Income Statement’ approach previously used by the Group.

Income tax expense comprises current and deferred taxes, with income tax expense recognised in the Income Statement, or recognised in equity to the extent that it relates to items recognised directly in equity.

Deferred tax is calculated using the balance sheet method by determining temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the tax base of those assets and liabilities as used for taxation purposes.

At 1 October 2004, a reduction to deferred tax liabilities of $18 million was recognised with a corresponding increase of $16 million after tax to retained earnings and an increase to Share Capital of $2 million representing share issue costs previously offset against Share Capital (refer Table 1).

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

AIFRS adjustments with effect from 1 October 2004, cont’d

(viii)	Software reclassification
	Reclassification only.

On transition to AIFRS, capitalised software assets were reclassified from Premises and Equipment to a separately identifiable intangible asset. This resulted in a reclassification of $435 million as at 1 October 2004 (refer Table 1). The amount reclassified decreased by $29 million and $48 million as at 31 March 2005 and 30 September 2005 respectively (refer Tables 4 and 5).

(ix)	Derivatives reclassification
	Reclassification only.

At 1 October 2004, there was a reclassification of $4.5 billion from Other Assets and $5.7 billion from Payables and Other Liabilities, to the new AIFRS Balance Sheet line items of Derivative Financial Assets and Derivative Financial Liabilities respectively (refer Table 1).

The amount reclassified from Other Assets decreased by $706 million at 30 September 2005 (31 March 2005: $434 million), and the amount reclassified from Other Liabilities decreased by $1.43 billion at 30 September 2005 (31 March 2005: $669 million) (refer Tables 4 and 5).

(x)

Other

The comparative AIFRS year ended 30 September 2005 and half year ended 31 March 2005 income statements contains minor leasing and tax remeasurement adjustments together with the impact of securitisation and defined benefit plan adjustments (refer Tables 2 and 3).

The balance sheets, as reflected in Tables 1, 4 and 5 also contain other minor remeasurements.

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

AIFRS adjustments with effect from 1 October 2005

(a)		Credit loss provisioning
		Initial increase in retained earnings. Volatility in future earnings.

AASB 139: ‘Financial Instruments: Recognition and Measurement’ adopts an incurred loss approach for credit loss provisioning and provides guidance on the measurement of incurred losses. Provisions are raised for losses that have already been incurred for exposures that are known to be impaired. The estimated losses on these impaired exposures are then discounted to their present value using the original effective interest rate. As this discount unwinds during the period between recognition of impairment and recovery of the written down amount, it is recognised in the Income Statement as interest income.

The General Provision in the Balance Sheet was replaced on adoption of AIFRS by a Collective Provision.

Exposures not individually known to be impaired are placed into pools of similar assets with similar risk characteristics to be collectively assessed for losses that have been incurred, but not identified yet. The required provision is estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the collective pool. The historical loss experience is adjusted based on current observable data.

The Collective Provision under AIFRS shares the same underlying measurement objectives as the previous AGAAP General Provision. However, as a result of the application of a new estimation methodology, certain judgemental risk measures have changed.

The Group believes that the resulting Collective Provision, while lower than the previous General Provision, comfortably falls within the probable range of losses that have been incurred but not identified in our portfolio.

On adoption of AIFRS, the previous Economic Loss Provisioning (ELP) charge to profit was replaced by a charge for individual provisions on impaired exposures together with a charge for movements in the Collective Provision.

As a result of these changes:

▪ at 1 October 2005, there was an increase of $1 million to retained earnings relating to individual provisions on impaired exposures as a result of the net impact of including expected interest cash flows in the calculation of the individual provision and discounting estimated future cash flows;

▪ at 1 October 2005, the Collective Provision was $288 million less than the AGAAP General Provision. After tax, this resulted in an increase to retained earnings of $207 million and a decrease in the foreign currency translation reserve of $23 million at 1 October 2005;

▪ individual provisions and movements in the Collective Provision are charged direct to the Income Statement, driving increased earnings volatility; and

▪ movements in the Collective Provision are driven by changes in portfolio size, portfolio mix, credit risk and economic cycles.

(b)		Fee revenue - financial service fees recognised as an adjustment to yield
		Initial reduction in retained earnings

Under AASB 139: ‘Financial Instruments: Recognition and Measurement’, fee income (such as loan approval fees) integral to the yield of an originated financial instrument (such as loans and advances measured at amortised cost), net of any direct incremental costs, are capitalised and deferred over the expected life of the financial instrument.

On 1 October 2005, certain fees that have previously been recognised in the Income Statement, were deferred and recognised against net loans and advances in the Balance Sheet with a corresponding reduction to retained earnings of $276 million after tax. The annual impact on net profit from this change is not material. However, there was an increase in interest income (offset by a reduction in fee income) and a reclassification to interest earning assets of customers’ liabilities for acceptances of $13.4 billion.

(c)		Derivative financial instruments, including hedging
		Initial reduction in retained earnings. Volatility in future earnings. New assets and liabilities recognised.

At 1 October 2005, recognition of the fair value of derivatives relating to securitisation vehicles and structured finance transactions reduced retained earnings by $78 million. The Group continues to evaluate hedging relationships and effectiveness for certain structured finance transactions, which introduces volatility within the Income Statement.

AIFRS permits hedge accounting (if certain criteria are met) for fair value hedges, cash flow hedges and hedges of investments in foreign operations. Fair value and cash flow hedge accounting can only be considered where prospective and retrospective effectiveness tests are met and the hedge relationship has been adequately documented. Ineffectiveness precludes the use of hedge accounting.

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

AIFRS adjustments with effect from 1 October 2005, cont’d

(c)

Derivative financial instruments, including hedging, cont’d

At 1 October 2005, the Group designated certain fair value and cash flow hedges and financial liabilities as fair value through other income in the profit and loss, resulting in an increase in net assets of $86 million represented by a decrease in retained earnings of $75 million, and an increase in reserves of $161 million.

(d)		Financial instruments classification and measurement
		Certain assets reclassified and measured at fair value. Initial decrease in retained earnings.

Under AIFRS, certain financial assets of the Group previously carried at amortised cost were either:

▪ reclassified as available-for-sale assets, resulting in measurement at fair value with movements being taken to an available-for-sale equity reserve (1 October 2005: $17 million); or

▪ reclassified as financial assets held at fair value through the profit and loss, with movements in fair value through other income in the profit and loss resulting in a decrease in retained earnings (1 October 2005: $3 million).

All derivative financial instruments, including those used as hedging instruments, are measured at fair value and recognised in the Balance Sheet. This requires an adjustment to reflect the market value of counterparty risk in the fair value of derivatives, which resulted in a decrease in retained earnings of $29 million at 1 October 2005. (Under AGAAP, counterparty risk was notionally allowed for as part of the General Provision.)

Financial instruments are measured under AIFRS at ‘bid’ or ‘offer’ prices rather than the previous AGAAP use of ‘mid’ prices. On 1 October 2005, this change in measurement resulted in a decrease to retained earnings of $5 million.

(e)		Classification of hybrid financial instruments
		Reclassification of ANZ StEPS from equity to debt.

Under AASB 132: ‘Financial Instruments: Presentation’, ANZ StEPS, a hybrid Tier 1 instrument treated as equity under previous AGAAP, was reclassified as debt. Prepaid issue costs, offset against the preference share capital balance under previous AGAAP, were capitalised and amortised to interest over a 5 year period from the date of issue.

At 1 October 2005, loan Capital increased to $1 billion representing the transfer of $987 million from Preference Share Capital to Loan Capital, capitalised prepaid issue costs of $11 million, deferred tax liability of $4 million and a decrease in retained earnings after tax of $6 million representing amortisation of prepaid issue costs. Ongoing distributions to the holders of ANZ StEPS will be treated as an interest expense in the Income Statement rather than as dividends under previous AGAAP.

(f)		Accounting for INGA
		Initial reduction in retained earnings and increase in notional goodwill..

Under AASB 131: ‘Interests in Joint Ventures’, and in line with previous AGAAP, the Group is required to equity account for its interest in INGA. The adoption of AIFRS by INGA resulted in the following significant measurement and recognition differences to previous AGAAP:

▪ reclassification and measurement of shareholder investments as available-for-sale assets. This change in measurement results in a reduction in investment return volatility experienced by INGA, as only realised gains and losses are reported in its net profit;

▪ increased policy liabilities resulting from a change in the discount rates applied in the actuarial calculation of policy liabilities and the separate presentation and change in basis of deferred acquisition costs (largely commissions) previously included within net policy liabilities (total impact is a decrease to retained earnings of $107 million);

▪ initial entry fee income previously taken upfront is deferred and amortised to income over time (total impact is a decrease to retained earnings of $23 million); and

▪ other sundry items (total impact is a decrease to retained earnings of $16 million)

Under AIFRS, the excess of the market value over net assets (EMVONA) for INGA’s life insurance controlled entities is no longer recognised. Accordingly, an adjustment for this amount has been made to notional goodwill of $72 million.

The Group’s 49% share of INGA’s net AIFRS adjustment is a decrease of $146 million to retained earnings and an increase of $8 million to the available-for-sale reserve, resulting in a reduction in the carrying value of the Group’s interest in INGA of $138 million as at 1 October 2005.

Explanation of material AIFRS adjustments to the AGAAP cash flow statement for 31 March 2005 and 30 September 2005

Various assets and liabilities (principally loans and advances and deposits and other borrowings) which were classified as investing or financing cash flows, are now reclassified as operating cash flows under AIFRS. The Group’s net cash position has not changed. There are no other material differences between the cash flow statement presented under AIFRS and that presented under previous AGAAP.

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Reconciliation tables

References are to the notes on pages 94 to 98.

Table 1: Balance sheet as at 1 October 2004

		Defined Benefit		Share
		Superannuation		Based		Securitisation
	AGAAP 1	Schemes		Payments		Vehicles

				(note
		(note (ii))		(iii))		(note (iv))

	$M	$M		$M		$M
Assets
Liquid assets	6,363	-		-		2
Due from other financial institutions	4,781	-		-		-
Trading securities	5,478	-		-		-
Derivative financial instruments	-	-		-		(8	)
Investment securities	7,746	-		-		2,797
Net loans and advances	204,962	-		-		2,144
Customer’s liability for acceptances	12,466	-		-		-
Regulatory deposits	176	-		-		-
Shares in associates and joint venture entities	1,960	-		-		-
Deferred tax assets	1,454	57		-		2
Goodwill and other intangible assets	3,269	-		-		-
Other assets	9,158	2		-		89
Premises and equipment	1,532	-		-		-
Total assets	259,345	59		-		5,026
Liabilities
Due to other financial institutions	7,349	-		-		-
Deposits and other borrowings	168,557	-		-		5,037
Derivative financial instruments	-	-		-		(2	)
Liability for acceptances	12,466	-		-		-
Income tax liabilities	1,914	-		24		-
Payables and other liabilities	14,212	200		-		(6	)
Provisions	845	-		-		-
Bonds and notes	27,602	-		-		-
Loan capital	8,475	-		-		-
Total liabilities	241,420	200		24		5,029
Net assets	17,925	(141	)	(24	)	(3	)
Shareholders’ equity
Ordinary share capital	8,005	-		(64	)	-
Preference share capital	987	-		-		-
Reserves
— Foreign currency translation reserve	218	-		-		-
— Asset revaluation reserve	31	-		-		-
— Share options reserve	-	-		44		-
— Other reserves	330	-		-		-
Total reserves	579	-		44		-
Retained profits	8,336	(141	)	(4	)	(3	)
Share capital and reserves attributable
to shareholders of the Company	17,907	(141	)	(24	)	(3	)
Minority interest	18	-		-		-
Total shareholders’ equity	17,925	(141	)	(24	)	(3	)

1. Reported financial position as at 30 September 2004

2. Other includes $39 million relating to the reclassification of legacy foreign currency translation and asset revaluation balances at 1 October 2004

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Effect of transition to AIFRS


				Software		Derivatives				Total AIFRS
Resetting		Taxation		Reclassification		Reclassification		Other 2		Adjustments		AIFRS

(notes (v)		(note
& (vi))		(vii))		(note (viii))		(note (ix))

$M		$M		$M		$M		$M		$M		$M

-		-		-		-		-		2		6,365
-		-		-		-		-		-		4,781
-		-		-		-		-		-		5,478
-		-		-		4,456		-		4,448		4,448
-		-		-		-		-		2,797		10,543
-		-		-		-		-		2,144		207,106
-		-		-		-		-		-		12,466
-		-		-		-		-		-		176
-		-		-		-		9		9		1,969
-		-		-		-		1		60		1,514
-		-		435		-		(5	)	430		3,699
-		-		-		(4,456	)	-		(4,365	)	4,793
-		-		(435	)	-		-		(435	)	1,097
-		-		-		-		5		5,090		264,435
-		-		-		-		-		-		7,349
-		-		-		-		-		5,037		173,594
-		-		-		5,656		-		5,654		5,654
-		-		-		-		-		-		12,466
-		(18	)	-		-		1		7		1,921
-		-		-		(5,656	)	50		(5,412	)	8,800
-		-		-		-		-		-		845
-		-		-		-		-		-		27,602
-		-		-		-		-		-		8,475
-		(18	)	-		-		51		5,286		246,706
-		18		-		-		(46	)	(196	)	17,729
-		2		-		-		-		(62	)	7,943
-		-		-		-		-		-		987
(218	)	-		-		-		-		(218	)	-
(31	)	-		-		-		-		(31	)	-
-		-		-		-		-		44		44
-		-		-		-		-		-		330
(249	)	-		-		-		-		205		374
249		16		-		-		(46	)	71		8,407
-		18		-		-		(46	)	(196	)	17,711
-		-		-		-		-		-		18
-		18		-		-		(46	)	(196	)	17,729

100

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Table 2: Income statement for the half year ended 31 March 2005

			Effect of transition to AIFRS

				Share
			Goodwill	Based				Total AIFRS
Reference	AGAAP1		Amortisation	Payments		Other2		Adjustments		AIFRS

			(note (i))	(note (iii))

	$M		$M	$M		$M		$M		$M

Total income	9,981		23	-		133		156		10,137
Interest income	8,277		-	-		143		143		8,420
Interest expense	(5,424	)	-	-		(131	)	(131	)	(5,555	)
Net interest income	2,853		-	-		12		12		2,865
Profit from disposal of investments								-
Other operating income	1,704		23	-		(10	)	13		1,717
Operating income	4,557		23	-		2		25		4,582
Operating expenses	(2,200	)	87	(39	)	-		48		(2,152	)
Profit before doubtful debts and income tax	2,357		110	(39	)	2		73		2,430
Provision for doubtful debts	(284	)	-	-		-		-		(284	)
Profit before income tax	2,073		110	(39	)	2		73		2,146
Income tax expense	(597	)	-	7		-		7		(590	)
Profit after income tax	1,476		110	(32	)	2		80		1,556
Net profit attributable to minority interest	(1	)	-	-		-		-		(1	)
Net profit attributable to shareholders of the Company	1,475		110	(32	)	2		80		1,555

1. Reported performance for the period ended 31 March 2005

2. Mainly relates to the impact of additional securitisation vehicles brought onto balance sheet

101

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Table 3: Income statement for the year ended 30 September 2005

			Effect of transition to AIFRS
	AGAAP1		Goodwill Amortisation	Share Based Payments		Other2		Total AIFRS Adjustments		AIFRS
Reference			(note (i))	(note (iii))
	$M		$M	$M		$M		$M		$M
Total income	20,979		45	—		273		318		21,297
Interest income	17,427		—	—		292		292		17,719
Interest expense	(11,629	)	—	—		(272	)	(272	)	(11,901	)
Net interest income	5,798		—	—		20		20		5,818
Other operating income	3,552		45	—		(19	)	26		3,578
Operating income	9,350		45	—		1		46		9,396
Operating expenses	(4,515	)	179	(80	)	(2	)	97		(4,418	)
Profit before doubtful debts and income tax	4,835		224	(80	)	(1	)	143		4,978
Provision for doubtful debts	(580	)	—	—		—		—		(580	)
Profit before income tax	4,255		224	(80	)	(1	)	143		4,398
Income tax expense	(1,234	)	—	17		(3	)	14		(1,220	)
Profit after income tax	3,021		224	(63	)	(4	)	157		3,178
Net profit attributable to minority interest	(3	)	—	—		—		—		(3	)
Net profit attributable to shareholders of the Company	3,018		224	(63	)	(4	)	157		3,175

1. Reported performance for the year ended 30 September 2005

2. Mainly relates to the impact of additional securitisation vehicles brought onto balance sheet

102

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Table 4: Balance sheet as at 31 March 2005


	AGAAP1		1 October 2004 AIFRS Adjustments		Goodwill	Defined Benefit Superannuation Schemes
Reference			(from Table 1)		(note (i))	(note (ii))
	$M		$M		$M	$M
Assets
Liquid assets	8,855		2		—	—
Due from other financial institutions	6,428		—		—	—
Trading securities	6,108		—		—	—
Derivative financial instruments	—		4,448		—	—
Investment securities	6,745		2,797		—	—
Net loans and advances	218,558		2,144		—	—
Customer’s liability for acceptances	12,922		—		—	—
Regulatory deposits	143		—		—	—
Shares in associates and joint venture entities	1,764		9		23	—
Deferred tax assets	1,234		60		—	(3	)
Goodwill and other intangible assets	3,118		430		87	—
Other assets	10,493		(4,365	)	—	2
Premises and equipment	1,481		(435	)	—	—
Total assets	277,849		5,090		110	(1	)
Liabilities
Due to other financial institutions	10,056		—		—	—
Deposits and other borrowings	180,410		5,037		—	—
Derivative financial instruments	—		5,654		—	—
Liability for acceptances	12,922		—		—	—
Income tax liabilities	1,715		7		—	1
Payables and other liabilities	12,431		(5,412	)	—	(10	)
Provisions	865		—		—	—
Bonds and notes	32,321		—		—	—
Loan capital	8,121		—		—	—
Total liabilities	258,841		5,286		—	(9	)
Net assets	19,008		(196	)	110	8
Shareholders’ equity
Ordinary share capital	8,028		(62	)	—	—
Preference share capital	1,858		—		—	—
Reserves
- Foreign currency translation reserve	(66	)	(218	)	—	—
- Asset revaluation reserve	31		(31	)	—	—
- Share options reserve	—		44		—	—
- Other reserves	330		—		—	—
Total reserves	295		(205	)	—	—
Retained profits	8,809		71		110	1
- Actuarial gain/loss on defined benefit plans	—		—		—	7
Total retained profits	8,809		71		110	8
Share capital and reserves attributable to shareholders of the Company	18,990		(196	)	110	8
Minority interest	18		—		—	—
Total shareholders’ equity	19,008		(196	)	110	8

1. Reported financial position for the period ended 31 March 2005

103

NOTES TO FINANCIAL STATEMENTS (continued)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Effect of transition to AIFRS
Share Based Payments		Securitisation Vehicles		Software Reclassification		Derivatives Reclassification		Other	Total AIFRS Adjustments		AIFRS
(note (iii))		(note (iv))		(note (viii))		(note (ix))
$M		$M		$M		$M			$M		$M

—		(1	)	—		—		—	1		8,856
—		—		—		—		—	—		6,428
—		—		—		—		—	—		6,108
—		(12	)	—		(434	)	—	4,002		4,002
—		44		—		—		—	2,841		9,586
—		(308	)	—		—		—	1,836		220,394
—		—		—		—		—	—		12,922
—		—		—		—		—	—		143
—		—		—		—		—	32		1,796
2		(10	)	—		—		—	49		1,283
—		—		(29	)	—		2	490		3,608
—		19		—		434		—	(3,910	)	6,583
—		—		29		—		—	(406	)	1,075
2		(268	)	—		—		2	4,935		282,784

—		—		—		—		—	—		10,056
—		(270	)	—		—		—	4,767		185,177
—		2		—		(669	)	—	4,987		4,987
—		—		—		—		—	—		12,922
(5	)	(13	)	—		—		—	(10	)	1,705
11		12		—		669		2	(4,728	)	7,703
—		—		—		—		—	—		865
—		—		—		—		—	—		32,321
—		—		—		—		—	—		8,121
6		(269	)	—		—		2	5,016		263,857
(4	)	1		—		—		—	(81	)	18,927

16		—		—		—		—	(46	)	7,982
—		—		—		—		—	—		1,858

—		—		—		—		—	(218	)	(284	)
—		—		—		—		—	(31	)	—
12		—		—		—		—	56		56
—		—		—		—		—	—		330
12		—		—		—		—	(193	)	102
(32	)	1		—		—		—	151		8,960
—		—		—		—		—	7		7
(32	)	1		—		—		—	158		8,967
(4	)	1		—		—		—	(81	)	18,909
—		—		—		—		—	—		18
(4	)	1		—		—		—	(81	)	18,927

104

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Table 5: Balance sheet as at 30 September 2005


	AGAAP1		1 October 2004 AIFRS Adjustments		Goodwill	Defined Benefit Superannuation Schemes
Reference			(from Table 1)		(note (i))	(note (ii))
	$M		$M		$M	$M
Assets
Liquid assets	11,600		2		—	—
Due from other financial institutions	6,348		—		—	—
Trading securities	6,285		—		—	—
Derivative financial instruments	—		4,448		—	—
Investment securities	6,941		2,797		—	—
Net loans and advances	230,952		2,144		—	—
Customer’s liability for acceptances	13,449		—		—	—
Regulatory deposits	159		—		—	—
Shares in associates and joint venture entities	1,872		9		45	—
Deferred tax assets	1,337		60		—	(13	)
Goodwill and other intangible assets	2,898		430		179	—
Other assets	9,903		(4,365	)	—	6
Premises and equipment	1,441		(435	)	—	—
Total assets	293,185		5,090		224	(7	)
Liabilities
Due to other financial institutions	12,027		—		—	—
Deposits and other borrowings	185,693		5,037		—	—
Derivative financial instruments	—		5,654		—	—
Liability for acceptances	13,449		—		—	—
Income tax liabilities	1,797		7		—	3
Payables and other liabilities	11,607		(5,412	)	—	(34	)
Provisions	914		—		—	—
Bonds and notes	39,073		—		—	—
Loan capital	9,137		—		—	—
Total liabilities	273,697		5,286		—	(31	)
Net assets	19,488		(196	)	224	24
Shareholders’ equity
Ordinary share capital	8,074		(62	)	—	—
Preference share capital	1,858		—		—	—
Reserves
- Foreign currency translation reserve	(225	)	(218	)	—	—
- Asset revaluation reserve	31		(31	)	—	—
- Share options reserve	—		44		—	—
- Other reserves	330		—		—	—
Total reserves	136		(205	)	—	—
Retained profits	9,393		71		224	(1	)
- Actuarial gain /loss on defined benefit plans	—		—		—	25
Total retained profits	9,393		71		224	24
Share capital and reserves attributable to shareholders of the Company	19,461		(196	)	224	24
Minority interest	27		—		—	—
Total shareholders’ equity	19,488		(196	)	224	24

1. Reported financial position for the financial year ended 30 September 2005

105

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Effect of transition to AIFRS
Share
Based		Securitisation			Software			Derivatives						Total AIFRS
Payments		Vehicles			Reclassification			Reclassification			Other			Adjustments			AIFRS

(note(iii)	)	(note (iv)		)	(note (viii)		)	(note (ix)		)
$M		$	M		$	M		$	M		$	M		$	M		$	M
—		(1		)	—			—			—			1			11,601
—		—			—			—			—			—			6,348
—		—			—			—			—			—			6,285
—		(12		)	—			(706		)	—			3,730			3,730
—		304			—			—			—			3,101			10,042
—		(606		)	—			—			—			1,538			232,490
—		—			—			—			—			—			13,449
—		—			—			—			—			—			159
—		—			—			—			—			54			1,926
5		—			—			—			—			52			1,389
—		—			(48		)	—			(5		)	556			3,454
—		(73		)	—			706			—			(3,726		)	6,177
—		—			48			—			—			(387		)	1,054
5		(388		)	—			—			(5		)	4,919			298,104
—		—			—			—			—			—			12,027
—		(408		)	—			—			—			4,629			190,322
—		—			—			(1,429		)	—			4,225			4,225
—		—			—			—			—			—			13,449
(12)		4			—			—			2			4			1,801
16		16			—			1,429			(4		)	(3,989		)	7,618
—		—			—			—			—			—			914
—		—			—			—			—			—			39,073
—		—			—			—			—			—			9,137
4		(388		)	—			—			(2		)	4,869			278,566
1		—			—			—			(3		)	50			19,538
41		—			—			—			—			(21		)	8,053
—		—			—			—			—			—			1,858
—		—			—			—			—			(218		)	(443		)
—		—			—			—			—			(31		)	—
23		—			—			—			—			67			67
—		—			—			—			—			—			330
23		—			—			—			—			(182		)	(46		)
(63)		—			—			—			(3		)	228			9,621
—		—			—			—			—			25			25
(63)		—			—			—			(3		)	253			9,646
1		—			—			—			(3		)	50			19,511
—		—			—			—			—			—			27
1		—			—			—			(3		)	50			19,538

106

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Table 6: Balance sheet as at 1 October 2005

			30
			September
			2005 AIFRS		Credit Loss		Fee
	AGAAP(1)		Adjustments		Provisioning		Revenue

			(from Table
Reference			(note 5)		(note (a))		(note (b))
	$M		$M		$M		$M
Assets
Liquid assets	11,600		1		—		—
Due from other financial institutions	6,348		—		—		—
Trading securities	6,285		—		—		—
Derivative financial instruments	—		3,730		—		—
Available for sale assets	—		—		—		—
Investment securities	6,941		3,101		—		—
Net loans and advances	230,952		1,538		289		(382	)
Customer’s liability for acceptances	13,449		—		—		—
Regulatory deposits	159		—		—		—
Shares in associates and joint venture entities	1,872		54		—		—
Deferred tax assets	1,337		52		(105	)	121
Goodwill and other intangible assets	2,898		556		—		—
Other assets	9,903		(3,726	)	—		(15	)
Premises and equipment	1,441		(387	)	—		—
Total assets	293,185		4,919		184		(276	)
Liabilities
Due to other financial institutions	12,027		—		—		—
Deposits and other borrowings	185,693		4,629		—		—
Derivative financial instruments	—		4,225		—		—
Liability for acceptances	13,449		—		—
Income tax liabilities	1,797		4		—		—
Payables and other liabilities	11,607		(3,989	)	—		—
Provisions	914		—		—		—
Bonds and notes	39,073		—		—		—
Loan capital	9,137		—		—		—
Total liabilities	273,697		4,869		—		—
Net assets	19,488		50		184		(276	)
Shareholders’ equity
Ordinary share capital	8,074		(21	)	—		—
Preference share capital	1,858		—		—		—
Reserves
- Foreign currency translation reserve	(225	)	(218	)	(23	)	—
- Asset revaluation reserve	31		(31	)	—		—
- Share options reserve	—		67		—		—
- Cashflow hedging reserve	—		—		—		—
- Available for sale reserve	—		—		—		—
- Other reserves	330		—		—		—
Total reserves	136		(182	)	(23	)	—
Retained profits	9,393		228		207		(276	)
Share capital and reserves attributable to shareholders’ of the Company	19,461		50		184		(276	)
Minority Interest	27		—		—		—
Total shareholders’ equity	19,488		50		184		(276	)

(1) Reported financial position for the financial year ended 30 September 2005

107

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

24. Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS), cont’d

Effect of transition to AIFRS
Derivative
Accounting	Financial
Including	Instruments		Reclassification				Accounting		Total AIFRS
Hedging	Remeasurement		of StEPS		for INGA		Other		Adjustments		AIFRS

(note (c))	(note (d))		(note (e))		(note (f))
$M	$M		$M		$M		$M		$M		$M
—	—		—		—		—		1		11,601
—	—		—		—		—		—		6,348
—	(112	)	—		—		—		(112	)	6,173
275	(42	)	—		—		—		3,963		3,963
1	11,153		—		—		—		11,154		11,154
(11)	(10,031	)	—		—		—		(6,941	)	—
(214)	(1,129	)	—		—		—		102		231,054
—	—		—		—		—		—		13,449
—	—		—		—		—		—		159
—	—		—		(138	)	—		(84	)	1,788
49	—		—		—		3		116		1,453
—	—		(4	)	—		(15	)	541		3,439
(11)	(38	)	11		—		(2	)	(3,781	)	6,122
—	—		—		—		—		(387	)	1,054
89	(199	)	7		(138	)	(14	)	4,572		297,757
—	—		—		—		—		—		12,027
(70)	—		—		—		—		4,559		190,252
35	6		—		—		—		4,266		4,266
—	—		—		—		—		—		13,449
54	(20	)	—		—		(9	)	29		1,826
4	(131	)	—		—		(1	)	(4,117	)	7,490
—	—		—		—		16		16		930
(7)	—		—		—		—		(7	)	39,066
65	—		1,000		—		—		1,065		10,202
81	(145	)	1,000		—		6		5,811		279,508
8	(54	)	(993	)	(138	)	(20	)	(1,239	)	18,249
—	—		—		—		—		(21	)	8,053
—	—		(987	)	—		—		(987	)	871
—	—		—		—		—		(241	)	(466	)
—	—		—		—		—		(31	)	—
—	—		—		—		—		67		67
162									162		162
(1)	(17	)	—		8		—		(10	)	(10	)
—	—		—		—		—		—		330
161	(17	)	—		8		—		(53	)	83
(153)	(37	)	(6	)	(146	)	(20	)	(203	)	9,190
8	(54	)	(993	)	(138	)	(20	)	(1,239	)	18,222
—	—		—		—		—		—		27
8	(54	)	(993	)	(138	)	(20	)	(1,239	)	18,249

108

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

25. US GAAP Reconciliation

The following is a condensed consolidated Statement of Net Income of the Group under US GAAP, for the half-years ended 31 March 2006, 30 September 2005 and 31 March 2005 and for the full year ended 30 September 2005:

	Half year Mar 06 $M		Full year Sep 05 $M		Half year Sep 05 $M		Half year Mar 05 $M
Total income	12,283		21,184		11,110		10,074
Interest income	10,731		18,177		9,507		8,670
Interest expense	(7,453	)	(11,925	)	(6,337	)	(5,588	)
Net interest income	3,278		6,252		3,170		3,082
Lending fees	243		403		208		195
Non-lending fees and commissions	937		1,810		941		869
Total fee and commission income	1,180		2,213		1,149		1,064
Fee and commission expense	(139	)	(232	)	(115	)	(117	)
Net fee and commission income	1,041		1,981		1,034		947
Other income	511		1,026		569		457
Total other operating income	1,552		3,007		1,603		1,404
Personnel expense	(1,401	)	(2,516	)	(1,284	)	(1,232	)
Premises expenses	(210	)	(379	)	(193	)	(186	)
Computer expenses	(264	)	(558	)	(295	)	(263	)
Other expenses	(448	)	(1,006	)	(499	)	(507	)
Restructuring	(23	)	(52	)	(22	)	(30	)
Operating expenses	(2,346	)	(4,511	)	(2,293	)	(2,218	)
Net income before loan loss charge and income tax	2,484		4,748		2,480		2,268
Allowance for loan loss charge	(243	)	(316	)	(32	)	(284	)
Net income before income tax	2,241		4,432		2,448		1,984
Income tax expense	(653	)	(1,256	)	(701	)	(555	)
Profit after income tax	1,588		3,176		1,747		1,429
Net income attributable to minority interest	(1	)	(3	)	(2	)	(1	)
Net income attributable to shareholders of the Company	1,587		3,173		1,745		1,428
Earnings per share (cents) according to US GAAP
Basic	87		174		96		78
Diluted	85		170		94		76

109

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

25. US GAAP Reconciliation, cont’d

The following is a condensed consolidated Balance Sheet of the Group under US GAAP, as at 31 March 2006, 30 September 2005 and 31 March 2005:

	Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M
Assets
Liquid assets	13,870		11,601		8,856
Due from other financial institutions	8,336		6,348		6,428
Trading securities	8,721		6,285		6,108
Derivative financial instruments	7,485		3,723		4,002
Available for sale assets	13,283		10,045		9,604
Net loans and advances	240,041		230,999		218,830
Customer’s liability for acceptances	13,692		13,449		12,922
Regulatory deposits	214		159		143
Shares in controlled entities and associates	1,774		1,675		1,571
Deferred tax assets	506		761		1,653
Goodwill and other intangible assets	3,574		3,829		3,937
Other assets	4,939		6,611		6,681
Premises and equipment	926		917		937
Total assets	317,361		296,402		281,672
Liabilities
Due to other financial institutions	13,345		12,027		10,056
Deposits and other borrowings	195,477		188,899		183,492
Derivative financial instruments	6,134		4,235		4,999
Liability for acceptances	13,692		13,449		12,922
Income tax liabilities	1,076		1,354		2,111
Payables and other liabilities	9,679		7,561		7,684
Provisions	908		914		865
Bonds and notes	46,849		39,103		32,348
Loan Capital	11,978		10,953		9,121
Total liabilities	299,138		278,495		263,598
Net Assets	18,223		17,907		18,074

Shareholders’ Equity
Ordinary share capital	8,091		8,076		8,030
Preference share capital	—		—		871
Reserves	(355	)	(405	)	(222	)
Retained Earnings	10,453		10,209		9,377
Share capital and reserves attributable to shareholders of the company	18,189		17,880		18,056
Minority interest	34		27		18
Total shareholders’ equity	18,223		17,907		18,074

110

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

25. US GAAP Reconciliation, cont’d

The consolidated financial statements of the Group are prepared in accordance with Australian Equivalents to International Financial Reporting Standards (AIFRS), which differ in some respects from Generally Accepted Accounting Principles in the United States (US GAAP).

As discussed in Note 1, the Group revised its accounting policies on 1 October 2005 to enable the preparation of financial statements that comply with AIFRS. An explanation of how the transition from previous Australian GAAP to AIFRS has impacted the Group’s reported financial position, financial performance and cash flow is set out in Note 24.

The AIFRS accounting policies have been consistently applied by all consolidated entities and to all periods presented in the consolidated financial report and the opening AIFRS balance sheet as at 1 October 2004, except for those policies relating to Standards for which comparatives are not restated, as permitted under the first time adoption transitional provisions. These Standards are AASB 132: “Financial Instruments: Presentation and Disclosure”, AASB 139: “Financial Instruments: Recognition and Measurement”, and AASB 4: “Insurance Contracts”. Accordingly, comparative information with respect to financial instruments and insurance contracts for local reporting is prepared under the Group’s previous accounting policies.

The following tables reconcile AIFRS net income, equity and gross assets to US GAAP net income, equity and gross assets.

Reconciliation of AIFRS to US GAAP

	Note	Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M
Net profit reported under AIFRS		1,811		1,620		1,555
Items having the effect of increasing (decreasing) net income according to US GAAP (total tax impact of adjustments shown separately)
Adjustment to goodwill	(ii)	(38	)	—		—
Pension expense adjustment and deficit amortisation	(v)	(7	)	(9	)	(10	)
Provision for loan impairment	(vii)	(19	)	264		—
Deconsolidation of special purpose vehicles	(viii)	(7	)	(5	)	(3	)
Mark to market of non compliant hedges	(x)	(109	)	(42	)	(53	)
Effective yield adjustment	(xi)	10		(10	)	—
Adjustment on entering joint venture	(xii)	—		(19	)	—
Guarantee fee obligation	(xiii)	—		(1	)	(4	)
Employee share issue and options	(xiv)	(38	)	42		(3	)
Interest on reclassified preference shares and amortisation of costs	(xv)	—		(35	)	(33	)
Deconsolidation of trust preferred structure	(xvi)	(12	)	66		—
Amortisation of core deposit intangible	(xviii)	(52	)	(59	)	(66	)
Life insurance and funds management business	(xix)	(35	)	(7	)	—
Other adjustments	(xx)	(6	)	11		10
Total tax impact of the above adjustments (refer below)		89		(71	)	35
Net income according to US GAAP		1,587		1,745		1,428
Adjustments to determine other comprehensive income to US GAAP
Net income according to US GAAP		1,587		1,745		1,428
Pension plan deficit net of tax (Tax is; Mar 2006: $16m; Sep 2005: $1m; Mar 2005; -$6m)	(v)	37		2		(14	)
Realised profit (loss) on sale of available for sale securities net of tax: (Tax is; Mar 2006: $nil; Sep 2005: $nil; Mar 2005; -$3m)	(vi)	—		—		(7	)
Unrealised profit (loss) on available for sale securities net of tax: (Tax is; Mar 2006: -$1m; Sep 2005: -$4m; Mar 2005; $5m)	(vi)	(3	)	(10	)	12
Currency translation adjustments, net of net investment hedges after tax: (Tax is; Mar 2006: $15m; Sep 2005: $13m; Mar 2005; $19m)	(ix)	(365	)	(159	)	(284	)
Mark to market of cash flow hedges net of tax: (Tax is; Mar 2006: $1m; Sep 2005: -$7m; Mar 2005; $16m)	(x)	3		(18	)	38
Total comprehensive income according to US GAAP		1,259		1,560		1,173

111

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

25. US GAAP Reconciliation, cont’d

		Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M
Total tax (expense)/benefit of the above adjustments comprises
Employee share issue and options		6		(6	)	(9	)
Pension expense adjustment and deficit amortisation		2		3		3
Effective yield adjustment		(3	)	3		—
Provisioning for loan impairment		11		(97	)	—
Amortisation of core deposit intangible		17		19		22
Mark to market of non-compliant derivative hedges		37		14		16
Guarantee revenue		—		—		1
Deconsolidation of trust preferred structure		—		(25	)	—
Adjustment to goodwill		11		—		—
Life insurance and funds management business		2		2		—
Other adjustments		6		16		2
Total tax impact		89		(71	)	35

Shareholders’ equity reported under AIFRS	Note	18,762		19,511		18,909
Adjustment to accumulated depreciation on buildings revalued	(i)	55		54		53
Elimination of gross asset revaluation reserves	(i)	(191	)	(193	)	(195	)
Accumulated amortisation of goodwill	(ii)	(263	)	(263	)	(263	)
Restoration of previously deducted goodwill	(ii)	695		695		695
Adjustment to goodwill	(ii)	(17	)	7		7
Deferred profit on sale and leaseback transactions	(iii)	(16	)	(18	)	(22	)
Pension expense adjustment	(v)	89		79		106
Unrealised (profit) loss on available for sale securities	(vi)	(11	)	3		18
Provision for loan impairment	(vii)	(25	)	264		—
Deconsolidation of special purpose entities	(viii)	(15	)	(5	)	1
Adjustment to reserves	(ix)	—		19		19
Mark to market of non compliant hedges	(x)	(28	)	10		70
Effective yield adjustment	(xi)	412		(6	)	4
Adjustment on entering into joint venture	(xii)	(237	)	(237	)	(218	)
Guarantee fee obligation	(xiii)	(28	)	(28	)	(27	)
Employee share issue and options	(xiv)	(9	)	23		28
Reclassification of preference shares	(xv)	—		(992	)	(991	)
Deconsolidation of trust preferred structure	(xvi)	(828	)	(787	)	—
Leasing	(xvii)	40		—		—
Accumulated amortisation of core deposit intangible	(xviii)	(177	)	(125	)	(65	)
Acquisition cost of NBNZ purchase adjustment	(xviii)	(37	)	(37	)	(37	)
Life insurance and funds management business	(xix)	99		(14	)	(7	)
Other adjustments	(xx)	9		19		3
Total tax impact of the above adjustments (refer below)		(90	)	(99	)	(32	)
Shareholders’ equity according to US GAAP		18,189		17,880		18,056

112

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

25. US GAAP Reconciliation, cont’d

	Half year Mar 06 $M		Half year Sep 05 $M		Half year Mar 05 $M
Total tax (expense)/benefit of the above adjustments comprises
Deferred profit on sale and leaseback transactions	5		6		7
Pension expense adjustment	(27	)	(24	)	(32	)
Effective yield adjustment	(127	)	2		(1	)
Provisioning for loan impairment	8		(97	)	—
Accumulated amortisation of core deposit intangible	58		41		21
Derivative and hedging activities	8		(3	)	(21	)
Deconsolidation of trust preferred structure	(25	)	(25	)	—
Deconsolidation of special purpose entities	4		1		—
Goodwill adjustment	5		(2	)	(2	)
Unrealised (profit) loss on available for sale securities	3		(1	)	(5	)
Leasing	(12	)	—		—
Guarantee fee obligation	8		8		8
Other adjustments	2		(5	)	(7	)
Total tax impact	(90	)	(99	)	(32	)

Total assets reported under AIFRS	Note	319,363		298,104		282,784
Adjustment to accumulated depreciation on buildings revalued	(i)	55		54		53
Elimination of gross incremental revaluations	(i)	(190	)	(191	)	(191	)
Accumulated amortisation of goodwill	(ii)	(263	)	(263	)	(263	)
Restoration of previously deducted goodwill	(ii)	695		695		695
Adjustment to goodwill	(ii)	(17	)	1		1
Reclassification of deferred tax assets against deferred tax liabilities	(iv)	(949	)	(635	)	376
Deferred tax assets	(iv)	—		16		—
Prepaid pension adjustment	(v)	(5	)	(3	)	(4	)
Unrealised (profit) loss on available for sale securities	(vi)	(15	)	3		18
Provision for impairment	(vii)	(25	)	264		—
Deconsolidation of special purpose entities	(viii)	(1,373	)	(1,403	)	(1,602	)
Mark to market of non compliant hedges	(x)	(134	)	63		121
Effective yield adjustment	(xi)	408		(9	)	1
Adjustment on entering into joint venture	(xii)	(237	)	(237	)	(218	)
Guarantee receivable	(xiii)	4		4		3
Employee share issue and options	(xiv)	(5	)	(5	)	(2	)
Issue Costs	(xv)	—		8		9
Deconsolidation of trust preferred structure	(xvi)	3		4		—
Leasing	(xvii)	49		—		—
Accumulated amortisation of core deposit intangible	(xviii)	(177	)	(125	)	(66	)
Adjustment to goodwill on recognition of deferred tax liability	(xviii)	104		104		—
NBNZ goodwill due to acquisition cost adjustment	(xviii)	(37	)	(37	)	(37	)
Life insurance and funds management business	(xix)	99		(14	)	(7	)
Other adjustments	(xx)	9		4		1
Total assets according to US GAAP		317,361		296,402		281,672

113

Reconciliation of previous Australian GAAP to US GAAP:

	Full year Sep 05		Full year Sep 04		Full year Sep 03
	$M		$M		$M
Net profit reported under Australian GAAP
Items having the effect of increasing (decreasing) net income according to US GAAP (total tax impact of adjustments shown separately)	3,018		2,815		2,348
Amortisation of goodwill	224		189		62
Pension expense adjustment and deficit amortisation	(17	)	(16	)	2
Provisioning for loan impairment – change in methodology	264		-		-
Mark to market of non compliant hedges	(95	)	(89	)	(47	)
Loan origination	(10	)	-		-
Adjustment on entering joint venture	(19	)	(14	)	-
Guarantee fee obligation	(5	)	(23	)	-
Employee share issue and options	(42	)	(43	)	(21	)
Interest on reclassified preference shares and amortisation of costs	(68	)	(64	)	(1	)
Deconsolidation of special purpose vehicles	-		-		-
Deconsolidation of trust preferred structure	66		-		-
Acquisition cost of NBNZ adjustment	-		(37	)	-
Amortisation of core deposit intangible	(125	)	-		-
Life insurance and funds management business	(7	)	-		-
Other adjustments	11		30		25
Total tax impact of the above adjustments (refer below)	(22	)	40		12
Net income according to US GAAP	3,173		2,788		2,380
Adjustments to determine other comprehensive income to US GAAP
Net income according to US GAAP	3,173		2,788		2,380
Pension plan deficit net of tax (Tax is; Sep 2005: -$5m; Sep 2004: -$6m; Sep 03; -$42m)	(12	)	(14	)	(99	)
Realised gain on sale of available for sale securities net of tax: (Tax is; Sep 2005: -$3m; Sep 2004: $Nil; Sep 03; $Nil)	(7	)	-		-
Unrealised profit (loss) on available for sale securities net of tax: (Tax is; Sep 2005: $1m; Sep 2004: $3m; Sep 03; -$1m)	2		7		(2	)
Currency translation adjustments net of hedges after tax: (Tax is; Sep 2005: $13m; Sep 2004: $9m; Sep 03; -$54m)	(443	)	233		(356	)
Mark to market of cash flow hedges net of tax: (Tax is; Sep 2005: $9m; Sep 2004: -$40m; Sep 03; $33m)	20		(94	)	76
Total comprehensive income according to US GAAP	2,733		2,920		1,999
Total tax (expense)/benefit of the above adjustments comprises
Pension expense adjustment and deficit amortisation	4		6		(1	)
Loan origination	3		-		-
Provisioning for loan impairment	(97	)	-		-
Amortisation of core deposit intangible	41		-		-
Marked to market of non-compliant derivative hedges	30		27		14
Guarantee revenue	2		7		-
Deconsolidation of trust preferred structure	(25	)	-		-
Other adjustments	20		-		(1	)
Total tax impact	(22	)	40		12

114

	Full year Sep 05		Full year Sep 04		Full year Sep 03
	$M		$M		$M
Shareholders’ equity reported under Australian GAAP	19,461		17,907		13,770
Adjustment to accumulated depreciation on buildings revalued	54		52		50
Elimination of gross asset revaluation reserves	(213	)	(224	)	(247	)
Accumulated amortisation of goodwill	(39	)	(263	)	(452	)
Restoration of previously deducted goodwill	695		695		695
Deferred profit on sale and leaseback transactions	(19	)	(20	)	(17	)
Pension expense adjustment	(81	)	(48	)	(14	)
Unrealised profit (loss) on available for sale securities	2		8		1
Provision for loan impairment – change in methodology	264		-		-
Mark to market of non compliant hedges	11		69		309
Loan origination	(10	)	-		-
Adjustment on entering into joint venture	(236	)	(217	)	(203	)
Guarantee fee obligation	(20	)	(16	)	-
Reclassification of preference shares	(992	)	(990	)	(988	)
Deconsolidation of trust preferred structure	(787	)	-		-
Accumulated amortisation of core deposit intangible	(125	)	-		-
Acquisition cost of NBNZ purchase adjustment	(37	)	(37	)	-
Other adjustments	(11	)	-		-
Total tax impact of the above adjustments (refer below)	(37	)	1		(84	)
Shareholders’ equity according to US GAAP	17,880		16,917		12,820
Total assets reported under Australian GAAP	293,185		259,345		195,591
Adjustment to accumulated depreciation on buildings revalued	54		52		50
Elimination of gross incremental revaluations	(191	)	(191	)	(203	)
Accumulated amortisation of goodwill	(39	)	(263	)	(452	)
Restoration of previously deducted goodwill	695		695		695
Reclassification of deferred tax assets against deferred tax liabilities	(635	)	(672	)	(726	)
Deferred tax assets	16		-		-
Prepaid pension adjustment	49		58		66
Unrealised profit (loss) on available for sale securities	3		12		2
Provision for impairment - change in methodology	264		-		-
Consolidation of variable interest entities	3,236		3,036		-
Mark to market of non compliant hedges	57		192		397
Loan origination	(10	)	-		-
Adjustment on entering into joint venture	(236	)	(217	)	(203	)
Guarantee receivable	4		4		-
Issue Costs	12		10		13
Accumulated amortisation of core deposit intangible	(125	)	-		-
Adjustment to goodwill on recognition of deferred tax liability	104		-		-
NBNZ goodwill due to acquisition cost adjustment	(37	)	(37	)	-
Other adjustments	(4	)	-		-
Total assets according to US GAAP	296,402		262,024		195,230
Total tax (expense)/benefit of the above adjustments comprises
Deferred profit on sale and leaseback transactions	6		6		5
Pension expense adjustment	24		14		4
Loan origination	3		-		-
Provisioning for loan impairment	(97	)	-		-
Accumulated amortisation of core deposit intangible	41		-		-
Derivative and hedging activities	(9	)	(19	)	(93	)
Deconsolidation of trust preferred structure	(25	)	-		-
Other adjustments	20		-		-
Total tax impact	(37	)	1		(84	)

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We have outlined in the following notes the significant differences between AIFRS, previous Australian GAAP and US GAAP. A more detailed discussion of the AIFRS policies is contained in Note 1 and the impacts of transition to AIFRS in Note 24.

During the period, consequent to the transition to AIFRS, the Group reviewed in detail its US GAAP reporting. This review identified several interpretational differences in the Group’s application of US GAAP. These differences impact the current and prior years. In accordance with APB 20 “Accounting Changes” and SEC Staff Accounting Bulletin No. 99 “Materiality”, these have been adjusted for in the US GAAP reconciliation in the current period, 2006, as they are not material, individually or in aggregate. These adjustments aggregated to a $85 million decrease in net income in the half year to 31 March 2006 and principally relate to life insurance and funds management, intangibles and financial instruments.

As a result of the review, the Group has enhanced US GAAP reporting resources and processes.

(i) Premises and equipment

In the past the Group at various times has revalued properties, increasing the book value of these assets as permitted under previous Australian GAAP. Under AIFRS, the Group holds its properties at a deemed cost value. Any increments on revaluation were credited directly to the Asset Revaluation Reserve (ARR), and decrements were debited to the ARR to the extent of any previous revaluation increments.

Under US GAAP, revaluation of properties is not permitted except for decrements, which are recorded in the Statement of Net Income. Subsequent recoveries to the Statement of Net Income are not allowed.

The impact of previous upward revaluations under AIFRS is that depreciation charges are higher and profits on disposal are lower than those recorded under US GAAP. The depreciation charges, together with the profits and losses on revalued assets sold have been adjusted to historical cost in the US GAAP reconciliation.

(ii) Goodwill

The requirements of AIFRS and US GAAP are the same with respect to goodwill. Under AIFRS, the past practice stipulated by previous Australian GAAP of systematically amortising goodwill over the expected period of benefit ceased and was replaced by impairment testing annually or more frequently if events or circumstances indicate that goodwill might be impaired.

Prior to 1 October 2002, under US GAAP goodwill was capitalised and amortised over the period of time during which the benefits were expected to arise. Post this date, a review for impairment applies rather than systematic goodwill amortisation. Until 1 October 2002, adjustments were made in the US GAAP reconciliation to restore goodwill written-off in full under Australia GAAP and to amortise such goodwill over the period of the expected benefits.

During the period, a reclassification between goodwill and finite life intangible assets was identified. As a result of this, a cumulative prior period adjustment (total impact after tax is $(19) million) has been made in the Statement of Net Income in the current period to reflect prior period amortisation. In addition, the Group has reassessed the useful life of a component of this intangible asset from 10 years to 4 years and has charged the impact to the Statement of Net Income.

(iii) Sale-leaseback transactions

Under AIFRS, gains on disposal under sale-leaseback transactions for operating leases can be recognised in the period of sale.

Under US GAAP, the gain is amortised over the lease term (typically this is between 5 and 10 years). This difference in treatment has been adjusted in the US GAAP reconciliation.

(iv) Income taxes

Under US GAAP, deferred tax liabilities and deferred tax assets are offset and presented for each tax paying component of an enterprise and within each particular tax jurisdiction. The impact of the difference in this approach to AIFRS has been adjusted for in the US GAAP reconciliation.

An adjustment of $2 million has been made to net income in the current period to reflect the cumulative impact of deferred tax assets not previously booked.

(v) Pension commitments

Under previous Australian GAAP, the Group accounted for the defined benefit superannuation schemes on a cash basis and did not recognise an asset or liability for the net position of the defined benefit superannuation schemes.

On adoption of AIFRS, surpluses (assets) and/or deficits (liabilities) that arise within defined benefit superannuation schemes are recognised on the Balance Sheet, which is consistent with the requirements of US GAAP.

The Group elected to apply the option available under AIFRS to recognise actuarial gains and losses in the Balance Sheet (i.e. the “direct to retained earnings” approach). The non-cash expense reflecting the notional cost of the benefits accruing to members of the defined benefit schemes in respect of service provided over the reporting period is charged to the Income Statement.

Recognition of an additional minimum liability is required under US GAAP where the accumulated benefit obligation exceeds the fair value of plan assets and an asset has been recognised as prepaid pension cost, or the liability already recognised as unfunded accrued pension cost, is less than the unfunded accumulated benefit obligation. This requirement differs to AIFRS.

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(v) Pension commitments, cont’d

During the current period, the other comprehensive income impact of the NZ defined benefit scheme was reviewed. An adjustment was identified as part of this review and has been booked through other comprehensive income in the current period (impact after tax is $20 million).

(vi) Available for sale securities

US GAAP requires that investments not classified as trading securities or as held to maturity securities shall be classified as available for sale securities and be recorded at market value in accordance with SFAS 115 ‘Accounting for Certain Investments in Debt and Equity Securities’.

Under AIFRS, as at 1 October 2005 certain financial assets of the Group previously carried at amortised cost were reclassified as available-for-sale assets, resulting in measurement at fair value with movements being taken to an available-for-sale equity reserve. Included in the available for sale classification at this time were loans.

While AIFRS and US GAAP are broadly consistent with respect to the available for sale classification, loans cannot be treated as available for sale under US GAAP and accordingly an adjustment has been made in the US GAAP reconciliation.

During the period, it was identified that certain equity securities had not been appropriately booked as available for sale for US GAAP purposes (total impact after tax is $(25) million). This adjustment was booked on transition to AIFRS to opening retained earnings. For US GAAP purposes, this has been booked through other comprehensive income in the current period.

(vii) Accounting for the impairment of loans

AASB 139 is more prescriptive in its guidance on impairment provisioning than either previous Australian GAAP or US GAAP.

For impairment provisioning, AASB 139 requires that there be objective evidence of impairment, resulting from an identified loss event, which has an impact on the present value of estimated future cash flows of a financial asset or a group of financial assets. It is an incurred loss approach, focussed on the balance sheet and requiring consideration of individual provisions (for specific impairments) and a collective provision (where a loss event has occurred but where the Group is unable to specifically identify the individual loans impacted).

This led the Group in 2005 to refine its previous method for determining impairment expense, referred to as ‘Economic Loss Provisioning’ (ELP) through discounting cash flows and changing certain judgemental risk measures. ELP determined an expense, based on the average one year loss expected to be incurred if the same loan portfolio was held over an economic cycle. Specific provisions were not charged directly to earnings but were treated as transfers from the general provision.

To assess the collective provisions, exposures are placed into pools having similar risk characteristics. The required provision is estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the collective pool. The historical loss experience is adjusted based on current observable data.

The collective provision shares the same underlying measurement objectives as the previous GAAP general provision it replaces.

In preparation for the implementation of AASB 139 “Financial Instruments: Recognition and Measurement” from 1 October, 2005, the Group added greater precision to the estimates used in its allowance for loan loss methodology in order to comply with AIFRS.

The Group substantially completed its analysis of the loan loss methodology in September 2005 and included this in the 2005 US GAAP reconciliation. Over the period subsequent to the finalisation of the US Form 20-F in December 2005, the Group continued to work on the transition to AIFRS. Along with other AIFRS matters, the Group completed and presented its analysis of the allowance for loan loss methodology in the March 2006 interim financial statements.

US GAAP is consistent with AIFRS in accounting for the impairment of loans with the exception of the discounting of cash flows. Discounting is not applied to smaller—balance homogenous loans that are collectively evaluated for impairment for US GAAP purposes.

We have further treated this adjustment as a change of estimate in preparing our US GAAP reconciliation, taking the impact to net income (impact after tax is $(8) million).

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(viii) Accounting for transfers and servicing of financial assets and extinguishments of liabilities and variable interest entities

For AIFRS purposes, the Group consolidates its subsidiaries where it is determined that there is a capacity to control or ANZ holds the majority of risks and benefits.

Securitised assets are derecognised when the right to receive cash flows has expired or the risks and rewards of ownership are transferred substantially.

SFAS 140 ‘Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities’ prescribes the accounting and disclosure requirements for transfers of financial assets and extinguishments of liabilities.

The Group retains servicing and (for some loans) custodian responsibilities for sold loans. These interests have been included in the Group’s US GAAP reconciliation.

In the year ended 30 September 2004, the Group first applied the provisions of FASB Interpretation No. 46 (Revised) “Consolidation of Variable Interest Entities” (“FIN 46R”). The Group is required to consolidate those Variable Interest Entities for which the Group is the primary beneficiary.

FIN 46R does not require the consolidation of Kingfisher Trust 2001-1G and Kingfisher Trust 2004-1G. This outcome differs to AIFRS and has been adjusted in the US GAAP reconciliation.

The current period net income includes a cumulative prior period adjustment of $(6) million after tax to reflect the profit impact of certain special purpose vehicles.

(ix) Comprehensive income

SFAS 130 ‘Reporting Comprehensive Income’ establishes standards for reporting and display of comprehensive income and its components.

Comprehensive income is defined as all changes in shareholders’ equity during a period excluding those resulting from investments by shareholders and distributions to shareholders. Total other comprehensive income is as follows (all amounts are post-tax):

	Half year Mar 06		Half year Sep 05		Half year Mar 05
	$M		$M		$M
Foreign currency translation reserve	(570	)	(424	)	(265	)

Mark to market of cash flow hedge	-		(3	)	14

Unrealised profit (loss) on available for sale securities	146		2		13

Pension plan deficit	(79	)	(117	)	(118	)
Total other comprehensive income	(503	)	(542	)	(356	)

On transition to AIFRS, an adjustment to the foreign currency translation reserve was identified for local reporting purposes (impact after tax is $(19) million). This adjustment was booked on transition to AIFRS to opening retained earnings. For US GAAP purposes, this has been booked through other comprehensive income in the current period.

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(x) Accounting for derivative instruments and hedging activities

The Group has adopted SFAS 133 ‘Accounting for Derivative Instruments and Hedging Activities’ as amended by SFAS 138 ‘Accounting for Certain Derivative Instruments and Certain Hedging Activities’ and SFAS 149 ‘Amendment of Statement 133 on Derivative Instruments and Hedging Activities’ in its US GAAP reconciliation from 1 October 2000.

Consistent with AIFRS, SFAS 133 requires all derivatives to be recognised on balance sheet at fair value. Movements in the fair value of derivatives are taken to the statement of financial performance, unless the derivatives meet the criteria prescribed in SFAS 133 for fair value, cash flow, or net investment hedges. If certain criteria are met derivatives can be designated as hedges.

Under SFAS 133 normal banking hedging practices may not qualify for hedge accounting, notwithstanding their ability to hedge existing balance sheet positions from an economic perspective.

As a result future fair value movements recognised in the US GAAP reconciliation may not be indicative of the Group’s risk profile. The Group uses instruments and hedging techniques that are effective in managing interest rate risk and foreign exchange risk.

Consistent with AIFRS, under SFAS 133, movements in the value of derivatives designated as fair value hedges are taken to the Statement of Net Income, along with the movement in the fair value of the underlying exposure that is being hedged to the extent the hedge is effective. Any ineffectiveness is recognised in the Statement of Net Income.

US GAAP includes the concept of the shortcut method. Under the shortcut method, an entity may assume that there is no ineffectiveness in a hedging relationship of interest rate risk involving a recognised interest-bearing asset or liability and an interest rate swap if certain stringent conditions are met. This method is not permitted under AIFRS.

Movements in the effective portion of the fair value of derivatives designated as cash flow hedges are taken to other comprehensive income. Any ineffectiveness is recognised in the US GAAP statement of financial performance immediately. Amounts are subsequently reclassified out of other comprehensive income into earnings as the hedged transaction impacts earnings or the hedge is de-designated and transactions become probable.

A cumulative adjustment of $(34) million after tax has been made in the current period to net income to reflect the fair value of certain economic hedge relationships that do not meet the criteria for hedge accounting under FAS 133 or AIFRS. These adjustments were identified as part of the Group’s AIFRS transition and typically relate to structured products and have not previously been adjusted for US GAAP purposes. For AIFRS purposes, these adjustments were booked to opening retained earnings on transition.

(xi) Effective yield adjustment

Under AIFRS, internal loan origination costs, other than loan commissions, cannot be deferred as an adjustment to yield, unless direct and incremental costs.

Under US GAAP, certain direct costs and non-refundable loan fees are deferred and recognised over the period of the related loan or facility.

Certain lending fees have been reclassified as interest income in the comparative period, $326 million in the half year to 30 September 2005 and $309 million in the half year to 31 March 2006. This reclassification has not resulted in a change to net income.

(xii) Gain and non-capitalisable costs recognised on entering joint ventures

In accordance with previous Australian GAAP the Group recognised profits (net of transaction costs) based on the difference between fair value and carrying value of the share of businesses transferred to an external party on entering into a joint venture.

The Group elected not to restate on transition to AIFRS those business combinations that took place prior to transition date.

Under US GAAP the gains may not be recognised as they occurred as a result of a non-monetary transaction, which involved transferring ownership of controlled entities in exchange for a non-controlling ownership interest in the joint venture.

This has been adjusted for in the US GAAP reconciliation.

119

(xiii) Guarantees

The Group accounts for guarantee arrangements in which it is the guarantor by applying the guidance in FIN 45 ‘Guarantors Accounting and Disclosure Requirements for Guarantors, including Indirect Guarantees of Indebtedness of Others’ (FIN 45). FIN 45 applies to all guarantees issued or modified after 15 December 2002 and requires that a guarantor recognise a liability equal to the fair value of the obligation undertaken at inception of the arrangement. The fair value of the obligation in issuing the guarantee at inception is typically equal to the net present value of the future amount of the premium receivable under the contract. Typically for AIFRS, if these facilities have a tenure of less than 12 months, the fee received is recognised upfront. In these situations, an adjustment is made in the US GAAP reconciliation.

(xiv) Accounting for stock — compensation plans

Under previous Australian GAAP, the Group recognised an expense equal to the full fair value of all deferred shares issued as part of the short term and long term incentive arrangements. The deferred shares vest over one to three years and may be forfeited under certain conditions. The Group did not recognise an expense for options issued to staff or for shares issued under the $1,000 employee share plan. On adoption of AIFRS, the Group recognised an expense for all share based remuneration, including deferred shares and options, and recognises this expense over the relevant vesting period.

For US GAAP and issues to 1 October 2005, APB No. 25 share-based employee compensation cost for variable share option plans (those with performance hurdles) is measured using the intrinsic value method. US GAAP compensation cost is determined at date of issue and is expensed if the strike price is less than the market price at the time and it is probable that performance hurdles are met.

To the extent that the intrinsic value increases in subsequent periods an additional expense is recorded.

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123 (revised 2004) Share-Based Payment. This Statement requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions) and more closely aligns AIFRS and US GAAP. That cost is recognised over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). FAS 123R eliminates the alternative to use the intrinsic value method of accounting that was previously applied by the Group. This revision applies to all share and option issues post 1 October 2005. The impact of applying FAS 123R to new issues in the current period, rather than the intrinsic value method, has been to increase net income by $37 million after tax by decreasing personnel expenses.

The tax effect is recognised under AIFRS and therefore no adjustment is made in the US GAAP reconciliation.

(xv) Classification of financial instruments with characteristics of both liability and equity

Under previous Australian GAAP, ANZ Stapled Exchangeable Preferred Securities (known as ANZ StEPS) were classified as equity instruments as they are not considered to be mandatorily converting to ordinary shares and do not meet the classification requirements of a financial liability upon issue.

Under US GAAP, StEPS is considered to be a hybrid security which has predominant characteristics of the stapled note liability. Accordingly, it is accounted for as a liability until such time as the note and the preference shares are unbundled and the investor holds preference shares.

On transition to AIFRS, StEPS has been reclassified as a debt instrument and is no longer a reconciling item between AIFRS and US GAAP under AASB 132 from 1 October 2005.

(xvi) Deconsolidation of trust preferred structure (under FIN46R)

The Group has applied the principles of FIN46R to its preferred structure. The impact of application has been to deconsolidate the following trust:

Instrument		Trust
Euro Trust Securities		ANZ Capital Trust III

The consequence of not consolidating the above trust is that the trust securities are considered to be debt for US GAAP purposes. This has resulted in the following impact on the US GAAP reconciliation:

· Distributions are now classified as interest

· Issue costs are amortised over a five year period

· Euro trust securities have been classified as debt and have been revalued to Australian dollars at the year-end spot rate. From 1 October 2005, the Group has hedged this foreign currency exposure for US GAAP purposes.

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(xvii) Leasing

US GAAP requires ANZ to record its investment in the lease as follows:

· Rentals receivable, net of that portion of the rental applicable to principal and interest on the non-recourse debt.

· A receivable for the amount of investment tax credit to be realised on the transaction.

· The estimated residual value of the leased asset.

· Unearned and deferred income.

Typically under US GAAP, the lessor’s net investment in a leveraged lease declines during the early years once the investment is completed and rises during the later years of the lease.

Under AIFRS, a leveraged lease is considered to be a finance lease. As a result, income is recognised on a constant periodic rate of return on net investment.

(xviii) Core deposit intangible

On 1 December 2003, the Company acquired 100% of the issued share capital of NBNZ Holdings Ltd and its controlled entities.

In this acquisition ANZ acquired what would be termed long term customer relationship intangible assets. An asset is required to be booked at fair value on acquisition for long term customer relationship intangible assets which meet the criteria identified in SFAS 141.

ANZ recognises a core deposit intangible separately from goodwill in relation to this acquisition for US GAAP purposes. This asset is not recognised for AIFRS purposes as the Group elected not to restate on transition those business combinations that took place prior to transition date. This intangible asset is equal to $316 million before tax ($212 million after tax) and is to be amortised on a non-linear basis over a period of approximately 4 years. The written down value of the asset as at 31 March 2006 is equal to $139 million (accumulated amortisation to date is equal to $177 million).

(xix) Life insurance and funds management

For US GAAP, contracts are distinguished between “long duration contracts” and “investment” contracts. This characterisation drives the accounting. US GAAP does not permit any loss reversals to be recognised upfront for long duration investment contracts, resulting in an adjusting difference to AIFRS.

Under AIFRS, acquisition costs are usually recognised as expenses in the reporting period in which they are incurred. This is generally offset by identifying a portion of the planned margins included in life insurance liabilities as relating to the recovery of acquisition costs.

Under US GAAP, the deferred acquisition cost balance for a long duration contract reflects expenses that vary with and are primarily related to the acquisition of new and renewal insurance contracts, and amortised in line with premiums. For an investment contract, a gross-up of initial commissions and up-front fees is required by establishing a deferred income reserve and running off in-line with deferred acquisition cost asset.

As part of the Group’s AIFRS transition work, certain adjustments in relation to the prior period treatment of leases held by the life insurance joint venture and the amortisation of finite life intangible assets were reviewed. This review identified adjustable differences that whilst immaterial in isolation and in aggregate, were booked to the opening balance sheet on transition to AIFRS (impact after tax is $(28) million). For US GAAP purposes, the cumulative prior period impact has been adjusted in the statement of net income in the current period.

(xx) Other

Other includes the effect of certain other differences between AIFRS and US GAAP, which both individually and in aggregate have no significant effect on shareholders’ equity, net income or total assets for the period.

(xxi) Earnings per share

Under US GAAP, EPS is computed in accordance with SFAS 128 ‘Earnings Per Share’. This Standard is broadly similar to AIFRS.

In calculating EPS in accordance with SFAS 128, instruments that have the characteristics of both debt and equity have been considered. Such instruments have been treated as follows in the calculation of dilutive EPS for US GAAP purposes:

· ANZ Stapled Exchangeable Preferred Securities (ANZ StEPS): Have been excluded from the dilutive EPS calculation as it is classified as debt for US GAAP purposes. On exchange, a holder will receive (at the Company’s discretion) either $100 cash for each ANZ StEPS exchanged or a number of ordinary shares calculated in accordance with a conversion ratio based on $100 divided by the market price of ordinary shares at the date of conversion less 2.5%. Based on the experience of similar issues in Australia it is considered more likely that the securities will be repaid in cash rather than in ordinary shares. For AIFRS purposes, ANZ StEPS is considered to be dilutive.

· US Trust Securities: Have been included in the dilutive EPS as if the securities are not redeemed or bought back prior to 15 December 2053 they will convert into preference shares, which in turn manditorily convert into a number of ordinary shares. For AIFRS purposes, US Trust Securities are also considered to be dilutive.

· Euro Trust Securities: Have been excluded from the dilutive EPS as if the securities are not redeemed or bought back prior to 15 December 2053, they will convert into preference shares. These preference shares do not convert into ordinary share capital. For AIFRS purposes, Euro Trust Securities are also excluded from the dilutive and basic EPS calculation.

121

(xxii) Details of Pension Expense

The elements of the net periodic pension cost are as follows:

	Half year Mar 06		Half year Sep 05		Half year Mar 05
	$M		$M		$M
Service cost	6		6		8
Interest cost	31		35		32
Expected return on schemes’ assets	(30	)	(32	)	(33	)
Amortisation net transition asset	-		(2	)	(2	)
Recognised gains/losses	2		1		3
Recognised prior service cost	5		4		2
Net periodic pension cost	14		12		10

Amortisation of prepaid pension expense	-		-		-
Employer contributions	(9	)	(8	)	(7	)
Net pension expense	5		4		3

Pension plan deficit amortisation	6		5		5
Pension expense adjustment and deficit amortisation	11		9		8

(xxiii) Recently issued Australian accounting standards

The following standards and amendments were available for early adoption but have not been applied by the Group:

· AASB 7: ‘Financial Instruments: Disclosure’. AASB 7 is applicable for annual reporting periods beginning on or after 1 January 2007

· AASB 2005-1: ‘Amendments to Australian Accounting Standards’ (May 2005) amending AASB 139. AASB 2005-1 is applicable for annual reporting periods beginning on or after 1 January 2006

· AASB 2005-9: ‘Amendments to Australian Accounting Standards’ (September 2005) replacing the presentation requirements for financial instruments in AASB 132. AASB 132 is applicable for annual reporting periods beginning on or after 1 January 2007

· AASB 2005-10: ‘Amendments to Australian Accounting Standards’ (September 2005) makes consequential amendments to AASB 132: ‘Financial Instruments: Disclosure and Presentation’, AASB 101: ‘Presentation of Financial Statements’, AASB 114: ‘Segment Reporting’, AASB 117: ‘Leases’, AASB 133: ‘Earnings per Share’, AASB 139 ‘Financial Instruments: Recognition and Measurement’, AASB 1, AASB 4, AASB 1023: ‘General Insurance Contracts’ and AASB 1038: ‘Life Insurance Contracts’ arising from the release of AASB 7. AASB 2005-10 is applicable for annual reporting periods beginning on or after 1 January 2007.

The initial application of AASB 7 and AASB 2005-10 are not expected to have an impact on the financial results of the Group as the standard and the amendment are only concerned with disclosures. AASB 7 requires the disclosure of the significance of financial instruments for an entity’s financial position and performance and of qualitative and quantitative information about exposure to risks arising from financial instruments. AASB 2005-10 amendments arise from the release of AASB 7 and are only applicable when an entity adopts AASB 7.

The initial application of AASB 2005-9 could have an impact on the financial results of the Group as the amendment could result in liabilities being recognised for financial guarantee contracts that have been provided for by the Group. The impact of application of AASB 2005-9 has not yet been quantified.

AASB 2005-1 does not permit the foreign currency risk of a highly probable intragroup forecast transaction to qualify as the hedged item. The initial application of AASB 2005-1 could have an impact on the financial results of the Group. An exercise to quantify the financial impact is currently being undertaken by the Group.

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(xxiv) Recently issued United States accounting standards

The following Standards will impact ANZ from 1 October 2006:

· Summary of Statement No. 154 Accounting Changes and Error Corrections “FAS 154” was issued in May 2005 and replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle.

Opinion 20 previously required that most voluntary changes in accounting principle be included as a cumulative adjustment to net income in the period of the change to the new accounting principle. FAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The Group does not expect that adoption of FAS 154 will have a material impact to total shareholders’ equity and net income for US GAAP purposes since the adoption of FAS 154 will contribute to the alignment of International Financial Reporting Standards and US GAAP.

· Summary of Statement No. 155 Accounting for Certain Hybrid Financial Instruments (“FAS 155”) was issued in February 2006 and amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

The new Standard permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. It also requires all entities to evaluate interests in securitised financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative. The impact of application of this FAS 155 has not yet been quantified, however is not expected to be material to the Group.

· Summary of Statement No. 156 Accounting for Servicing of Financial Assets (“FAS 156”) was issued in March 2006 and amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognised servicing assets and servicing liabilities. FAS 156 requires an entity to recognise a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. This asset or liability must be initially recognised at fair value, if practicable. Subsequently, measurement is permitted via an amortisation or fair value method. The impact of application of FAS 156 is not expected to be material to the Group.

· In November 2005, the FASB issued FASB Staff Position (“FSP”) FAS 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. The FSP nullifies the accounting guidance relating to the recognition of investment portfolio other-than-temporary impairments of EITF 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”; carries forward the disclosure requirements included in the EITF 03-01 which have been effective and applied by the Group; supersedes EITF Topic No. D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value”; and references existing other-than-temporary impairment guidance including FAS 115, “Accounting for Certain Investments in Debt and Equity Securities and SEC Staff Accounting Bulletin Topic 5M, “Other-Than-Temporary Impairment of Certain Investments in Debt and Equity Securities”. The FSP is effective from 1 October, 2006 and is not expected to have a material impact on the Group’s US GAAP equity and net income.

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DEFINITIONS

Adjusted common equity (ACE) is Tier 1 capital less preference shares and other Hybrid Capital at current rates and regulatory deductions from total capital.

AIFRS - Australian Equivalents of International Accounting Standards

Business Unit description:

Personal Banking Australia

- Banking Products manufactures deposit, transaction account and margin lending products.

- Consumer Finance provides consumer and commercial credit cards, ePayment products, personal loans, and merchant payment and ATM facilities.

- Mortgages provides mortgage finance secured by residential real estate in Australia.

- Rural Commercial and Agribusiness Products provides a full range of banking services to personal customers across Australia, and to small business and agricultural customers in rural Australia.

- Investment & Insurance Products comprises the equity accounted earnings from INGA’s core business operations (excludes investment earnings), the Financial Planning distribution business, margin lending, the trustee business and E*Trade.

- Other includes the branch network, whose costs are fully recovered from product business units, Private Banking and marketing and support costs.

Institutional

- Client Relationship Group manages customer relationships and develops financial services solutions and strategies for large businesses with a turnover greater than $100 million in Australia and New Zealand and, through corporate clients where the Group has an existing customer relationship, in the United Kingdom, United States and Asia.

- Corporate and Structured Financing provides complex financing and advisory services, structured financial products, leasing, private equity, project and leveraged finance and infrastructure investment to ANZ’s Institutional, Corporate and Small Business customers.

- Debt Product Group manages Institutional’s balance sheet with particular focus on credit quality, diversification and maximising risk adjusted returns.

- Markets provides origination, underwriting, structuring, risk management, advice and sale of credit and derivative products, foreign exchange and commodity trading and sales-related services globally.

- Trade and Transaction Services provides cash management, trade finance, international payments, clearing and custodian services principally to institutional and corporate customers.

New Zealand Businesses

- ANZ Retail operating under the ANZ brand in New Zealand provides a full range of banking service to personal and business banking customers.

- Corporate Banking in New Zealand incorporates the ANZ and NBNZ brands, and provides financial solutions through a relationship management model for medium-sized businesses with a turnover up to NZD100 million.

- National Bank Retail operating under the National Bank brand in New Zealand, provides a full range of banking services to personal customers from youth through to private banking, and business banking customers with turnover up to NZD5 million.

- NBNZ refers to the operations of the National Bank of New Zealand Limited purchased on 1 December 2003. These operations were amalgamated with ANZ Banking Group (New Zealand) Limited on 26 June 2004 to form ANZ National Bank Limited (ANZ NB). NBNZ was reported as a separate business unit until 30 September 2004.

- Rural Banking in New Zealand provides a full range of banking services to rural and agribusiness customers.

Corporate Australia

- Business Banking in Australia provides a full range of banking services to metropolitan-based small to medium businesses, with turnover up to $10 million and business banking funds under management of more than $50,000.

- Corporate Banking Australia manages customer relationships and develops financial solutions for medium-sized businesses with a turnover of $10 million to $150 million.

- Small Business Banking in Australia provides business banking services to metropolitan-based small businesses, with business banking funds under management of up to $50,000.

Non-continuing Businesses comprises the London headquartered project finance business the run-off of New Zealand conduit transactions and certain structured finance transactions that ANZ has exited as part of its de-risking strategy.

Group Centre

- Treasury is the banker to all ANZ businesses charged with providing cashflow support, ensuring liquidity, managing interest rate risk and providing capital to the businesses.

Economic loss provisioning (ELP) charge is determined based on the expected average annual loss of principal over the economic cycle for the current risk profile of the lending portfolio.

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DEFINITIONS (continued)

Equity standardisation Economic Value Added (EVATM) principles are in use throughout the Group, whereby risk adjusted capital is allocated and charged against business units. Equity standardised profit is determined by eliminating the impact of earnings on each business unit’s book capital and attributing earnings on the business unit’s risk adjusted capital. This enhances comparability of business unit performance. Geographic results are not equity standardised.

Impaired assets are those whose carrying value was greater than the amount expected to be recovered over its life. More specifically, in relation to loans or other credit facilities, impairment may arise where there is reasonable doubt about the collectability of interest, fees (past and future) or principal outstanding, or where concessional terms have been provided because of the financial difficulties of the customer.

Income includes external interest income, other external operating income, and if positive and net intersegment interest income.

Individual provision charge is the amount of impairment on those loans and advances assessed for impairment on an individual basis (as opposed to on a collective basis). It takes into account expected cash flow over the lives of those loans and advances.

Liquid assets are cash and cash equivalent assets. Cash equivalent assets are highly liquid investments with short periods to maturity, are readily convertible to cash at ANZ’s option and are subject to an insignificant risk of changes in value.

Net advances include gross loans and advances and acceptances less income yet to mature and provisions (for both as at and average volumes).

Net inter business unit expenses - consists of the charges made between business units for the provision of support services. Both payments and receipts by business units are shown as net inter business unit expenses.

Net interest margin is net interest income as a percentage of average interest earning assets. Non-assessable interest income is grossed up to the equivalent before tax amount for the purpose of these calculations.

Net interest spread is the average interest rate received on interest earning assets less the average interest rate paid on interest bearing liabilities. Non-assessable interest income is grossed up to the equivalent before tax amount for the purpose of these calculations.

Net non-interest bearing items, referred to in the analysis of interest spread and net interest average margin, includes shareholders’ equity, impairment of loans and advances, and deposits not bearing interest and other liabilities not bearing interest, offset by premises and equipment and other non-interest earning assets. Impaired loans are included within interest bearing loans, advances and bills discounted.

Net tangible assets equals share capital and reserves attributable to shareholders of the company less preference share capital and unamortised intangible assets (including software).

Operating expenses exclude the provision for impairment of loans and advances charge.

Operating income in business segments includes equity standardised net interest and other operating income.

Overseas Markets includes all operations outside of Australia and New Zealand. The Group’s geographic segments are Australia, New Zealand and Overseas Markets.

Profit on a fully comparable AIFRS basis is management’s estimate of prior year results adjusted for the impact of those AIFRS standards, principally financial instrument and insurance related, which became effective from 1 October 2005. No adjustment has been made to retrospectively designate derivatives hedging the Group’s funding on the basis of impracticability.

Return on asset ratios include net intra group assets which are risk weighted at 0% for return on risk weighted assets calculations.

Significant items are items that have a material impact (typically >$10 million) on profit after tax, or the earnings used in the earnings per share calculation. Significant items also do not arise in the normal course of business and are infrequent in nature. Divestments are typically defined as significant items.

Total advances include gross loans and advances and acceptances less income yet to mature (for both as at and average volumes). Loans and advances classified as available-for-sale are excluded from total advances.

Unproductive facilities comprise facilities (such as standby letters of credit, bill endorsements, documentary letters of credit, guarantees to third parties, undrawn facilities to which the Group is irrevocably committed and market related exposures) where the customer status is non-accrual.

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ALPHABETICAL INDEX

		*PAGE*
Associates, joint venture entities and investments		92
Average balance sheet and related interest		84
Business Performance Review		38
Capital management		82
Chief Financial Officer’s Review		8
Changes in the composition of the Group		92
Contingent liabilities and contingent assets		89
Consolidated Condensed Cash flow statement		60
Consolidated Condensed Income Statement		57
Consolidated Condensed Balance Sheet		58
Consolidated Condensed Statement of recognised income and expense		59
Definitions		111
Derivative financial instruments		72
Dividends		70
Earnings per share		71
Exchange rates		93
Financial Highlights		2
Four year summary by half year		52
Geographic Segment Performance		51
Highlights		1
Impact of adopting Australian Equivalents to International Financial Reporting Standards (AIFRS)		94
Impaired financial assets		76
Income		67
Income tax expense		69
Interest spreads and net interest average margins		87
Loan capital		79
Net loans and advances		74
Note to the Cash Flow Statement		91
Operating expenses		68
Provision for credit impairment		78
Segment analysis		88
Share Capital		79
Shareholders’ Equity		80
Significant accounting policies		61
Significant events since balance date		93
US GAAP reconciliation		109

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