eli5: who or what is profiting from the MASSIVE interest rate rises in Australia? Is it the banks holding your mortgage? The Government?!.. basically, who is loving life right now?
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The banks are certainly profiting from the interest rate rises in Australia. Banks are able to charge higher interest rates on their loans, which translates into higher profits for them. The government is also benefiting from the higher interest rates, as it can borrow money more cheaply and use the funds to finance its various programs.
Australia’s (and the USa’s) central bank hold the financial reserves and releases the money supply. If the economy has too much inflation, they try to hold it down by increasing the rate at which banks can borrow money from the government. So banks then charge more to borrowers, but also, give better savings and CD rates to bank customers. Which increases savings and decreases spending, and decreases inflation.
The banks are certainly profiting from the interest rate rises in Australia. Banks are able to charge higher interest rates on their loans, which translates into higher profits for them. The government is also benefiting from the higher interest rates, as it can borrow money more cheaply and use the funds to finance its various programs.
Australia’s (and the USa’s) central bank hold the financial reserves and releases the money supply. If the economy has too much inflation, they try to hold it down by increasing the rate at which banks can borrow money from the government. So banks then charge more to borrowers, but also, give better savings and CD rates to bank customers. Which increases savings and decreases spending, and decreases inflation.
Honestly, no one is.
The rising interest rates are being set by the Reserve Bank in an effort to curb inflation by making it less desirable to borrow large sums of money to pay for goods and services. The theory being if people stop spending free or cheap credit for all the overpriced stuff (like mortgages for real estate), then the prices will come down. Hopefully this will flow down to the essentials as well.
Banks aren’t particularly happy about it, because the rise in interest payments for loans they are getting is being offset by the interest they have to pay on their deposits and their own loans.
Consumers already aren’t happy about it, but this had been coming for a long time. The covid pandemic sent the economy into a tail spin, so the reserve bank lowered interest rates to make credit cheap so the wheels could keep turning. Unfortunately at the same time, a lot of real estate prices exploded. Taking both into account it was only a matter of time until prices on other goods followed when pandemic conditions alleviated. Now inflation is higher than expected or desired and interest rates have to come back up anyway, it’s just a very unfortunate timing.
Honestly, no one is.
The rising interest rates are being set by the Reserve Bank in an effort to curb inflation by making it less desirable to borrow large sums of money to pay for goods and services. The theory being if people stop spending free or cheap credit for all the overpriced stuff (like mortgages for real estate), then the prices will come down. Hopefully this will flow down to the essentials as well.
Banks aren’t particularly happy about it, because the rise in interest payments for loans they are getting is being offset by the interest they have to pay on their deposits and their own loans.
Consumers already aren’t happy about it, but this had been coming for a long time. The covid pandemic sent the economy into a tail spin, so the reserve bank lowered interest rates to make credit cheap so the wheels could keep turning. Unfortunately at the same time, a lot of real estate prices exploded. Taking both into account it was only a matter of time until prices on other goods followed when pandemic conditions alleviated. Now inflation is higher than expected or desired and interest rates have to come back up anyway, it’s just a very unfortunate timing.
The banks holding your mortgage are the primary beneficiaries of the MASSIVE interest rate rises in Australia. The banks are able to increase their profit margins as they charge higher interest rates on the loans they provide. The Government also benefits from the higher interest rates as they receive more revenue from taxes on the banks’ profits.
Nobody directly. Everybody indirectly. This is central bank squeezing tight the money supply in order to stabilize prices, as is their job. This is just monetary policy done the way its meant to be done.
The banks holding your mortgage are the primary beneficiaries of the MASSIVE interest rate rises in Australia. The banks are able to increase their profit margins as they charge higher interest rates on the loans they provide. The Government also benefits from the higher interest rates as they receive more revenue from taxes on the banks’ profits.
Nobody directly. Everybody indirectly. This is central bank squeezing tight the money supply in order to stabilize prices, as is their job. This is just monetary policy done the way its meant to be done.
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