The country's biggest bank is bracing for a significant economic downturn and warning some customers will struggle with rising interest rates.

ANZ posted a record profit of $2.3 billion for the year ending September but it has also increased its provisions for bad debts as interest rate rises put the squeeze on customers.

• "Covid sort of seems to be over but we've got all these other dark clouds on the horizon" - ANZ chief executive Antonia Watson

The bank's chief executive Antonia Watson told Morning Report there were dark clouds ahead for the country's economy.

She said about half the bank's customers with home mortgages were still on interest rates of 2 or 3 percent but they would be paying more over the next year or so.

"We're not really seeing any signs of stress at the moment in our customer base; people have saved, they've had pay rises ... but that's going to change, I think, over the next year."

ANZ had set aside $751 million to help it tackle the "bad and doubtful debts" it was expecting in the coming months, she said.

"We put a lot of that aside over Covid and now we're looking forward and saying, well Covid sort of seems to be over but we've got all these other dark clouds on the horizon."

The economy had fared better than expected over the past two years, Watson said, and the bank had been a beneficiary of that, but so had some of its customers.

"People are switching from current accounts to term deposits," she said.

"Term deposit rates you get start with a 4 now."

While there was pain to come for mortgage holders, Watson said many of the bank's customers - both business and personal - had positioned themselves well as interest rates had risen.

"We've seen saving rates increase, we've seen people paying off debts, we've seen people ahead on their debt repayments; I think we couldn't be in a better position as an economy going into something like this."

She said the bank had a range of tools it could offer its customers to help them if they were struggling but said reining in discretionary spending was the key.

"It's the medicine we need to take to keep inflation under control."

Options for those facing higher interest rates on their mortgages included locking in rates 90 days out from their re-fix dates or restructuring their home loans by increasing the term or moving to interest-only payments, she said.

"Our responsibility right now is to make sure that we're in a good position to help our customers as people start rolling off the lower interest rates."