National Australia Bank chief executive Andrew Thorburn said this week's move to cut interest rates to record lows should boost consumer spending and confidence, but played down the risk that lower rates could reignite a debt-fuelled housing boom.

As the country's biggest business bank delivered a profit result showing lower bad debts than rivals, Mr Thorburn outlined a relatively upbeat view on the economy, which he said was finding its feet after the resources boom.

Interest rates are so low anyway, whether it's 2 per cent cash rate or 1.75 per cent, people aren't going to go and buy another house or not based on that. 

NAB chief Andrew Thorburn

While previous rate cuts have tended to boost house prices in Sydney and Melbourne, Mr Thorburn argued the latest reduction in borrowing costs was not big enough to encourage home buyers to pile on more debt.

Relaxed: Andrew Thorburn says this week's interest rate cut should give households more scope to spend. Photo: Jessica Hromas

The comments came as NAB beat expectations with a 6.5 per cent rise in first-half profits, which hit $3.3 billion, helped by very low bad debt costs and wider profit margins. NAB's result bucked this week's run of weaker-than-expected profits from ANZ Bank and Westpac, though some analysts questioned whether its lower provisioning for bad debts was a future risk.

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After the Reserve Bank surprised many bankers by cutting official interest rates to 1.75 per cent this week, Mr Thorburn said the rate cut should improve households' cashflow, giving them more scope to spend.

"You would hope that people would be using that to spend, invest or save, including repaying down their mortgage, but that just gives the bank more capacity to lend to others," Mr Thorburn told BusinessDay. "I'm hoping that's where it will go."

Interest rate cuts last year were followed by rapid growth in house prices in Sydney and Melbourne, but banks have since tightened lending significantly, including by requiring bigger deposits. Mr Thorburn argued this week's RBA cut would not unleash another house price boom.

"I don't think it's going to make a big difference to people borrowing a lot more; I think it will help their cashflow to help them repay or save," he said. "I think interest rates are so low anyway, whether it's 2 per cent cash rate or 1.75 per cent, people aren't going to go and buy another house or not based on that."

NAB was the only big four bank to predict the Reserve Bank's rate cut this week, and it also passed on the full reduction to borrowers within minutes, pressuring others to follow suit.

In its first result since it offloaded its troubled UK business, NAB said earnings in its Australian business rose 5 per cent to $2.9 billion, helped by lending growth and wider net interest margins.

A key reason for the solid growth was its low bad debt charge, which was 0.14 per cent of assets, compared with 0.17 per cent for Commonwealth Bank, 0.21 per cent for Westpac, and 0.32 per cent for ANZ Bank.

Credit Suisse analyst Jarrod Martin said NAB's profits were the "cleanest" in several years, and the business bank appeared to be gaining momentum. However, he said the market was grappling with banks' different approach to provisioning for soured loans.

"I think the market is comfortable that NAB has taken a reasonable provision on those credits that it has impaired, but there is some scepticism that is has not impaired all of its single-name exposures," Mr Martin said.

NAB will keep the interim dividend unchanged at 99¢ a share, which will be fully franked and paid on July 5. 

Maintaining the dividend pushed the dividend payout ratio to 79 per cent, outside its 70 to 75 per cent range, and analysts expect it will keep dividends flat for at least the next half as it tries to lower its payout ratio.